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Nette, a public limited company, manufactures mining equipment and extracts natural gas. The directors are uncertain about the role of the Framework for the Preparation and Presentation of Financial Statements (the Framework) in corporate reporting. Their view is that accounting is based on the transactions carried out by the company and these transactions are allocated to the company’s accounting period by using the matching and prudence concepts. The argument put forward by the directors is that the Framework does not take into account the business and legal constraints within which companies operate.


Explain the importance of the Framework to the reporting of corporate performance and whether it takes into account the business and legal constraints placed upon companies.


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