Final answer:
Conceptual frameworks are used to decide what information is useful to the financial statement user. They establish the objective of financial reporting and outline the qualitative characteristics of financial information. These frameworks also provide guidance on the preparation and presentation of financial statements.
Step-by-step explanation:
When deciding what information is useful to the financial statement user, conceptual frameworks are used. These frameworks help guide the preparation and presentation of financial statements, ensuring that they provide relevant and reliable information to the users. One commonly used framework is the conceptual framework developed by the International Accounting Standards Board (IASB). This framework establishes the objective of financial reporting as providing information that is useful for making economic decisions. It also outlines the qualitative characteristics of financial information, such as relevance and reliability. For example, relevant information is one that can impact the decisions of users, while reliable information is one that is free from error and bias. Furthermore, the framework identifies the primary financial statements that should be included in financial reporting, such as the balance sheet, income statement, and cash flow statement. It also provides guidance on the measurement, recognition, and presentation of assets, liabilities, revenues, and expenses.