Chapter 1

CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING

Discussion Question 15:
1.
2.
3.
4.
5.
6.
7.
8.

Understandability
Reliability, neutrality, prudence
Reliability, faithful representation, completeness
Completeness, relevance, comparability
Reliability
Completeness, relevance
Understandability
Relevance, timeliness

Discussion Question 16:

1.
2.
3.
4.

5.
6.
7.
8.

9.
10.
11.
12.

13.

14.
15.

Correct
Incorrect, no particular presentation requirements are discussed in the Framework.
Correct
Incorrect, understandability is not an excuse to omit complex information in the
financial statements. Users are expected to possess basic business knowledge and to
exercise diligence.
Correct
Correct
Incorrect, expenses do not involve transactions with owners.
Incorrect, an entity shall not leave its accounting policy unchanged if management
assesses that another method of accounting will more relevantly and reliably present
enterprise performance and financial position.
Incorrect, understandability depends on two factors: the quality of the information
and the characteristics of the users.
Incorrect, an information loses its relevance if it is not communicated early enough
for decision making needs of the users.
Correct
Incorrect, there is no standard form for the presentation of financial statements; the
management prepares the financial statements using form that will best communicate
to users the enterprises financial position, performance and other changes in financial
position.
Incorrect, the main objective of consistency is to present actual similarities and
differences between reporting periods and between enterprises, and not to smooth
profit.
Incorrect, the financial capital concept does not limit the measurement basis of
financial statement elements to only one type.
Correct

Chapter 1 Framework for the Presentation of Financial Statements

Discussion Question 17:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.

Fair value (current cost)

Present value
Historical cost and net realizable value
Historical cost and current cost
Historical cost and current cost
Current cost
Current cost
Present value
Historical cost and current cost
Historical cost and net realizable value
Present value
Present value
Combination of historical cost, current cost, present value and realizable value
Historical cost
Present value
Multiple Choice

MC1
MC2
MC3
MC4
MC5
MC6
MC7
MC8
MC9
MC10
MC11
MC12
MC13
MC14
MC15
MC16
MC17
MC18
MC19
MC20

B
D
C
A
B
C
A
B
C
A
C
C
A
D
D
C
A
B
B
A

MC21
MC22
MC23
MC24
MC25
MC26
MC27
MC28
MC29
MC30
MC31
MC32
MC33
MC34
MC35
MC36
MC37
MC38
MC39
MC40

C
C
A
B
A
B
B
C
A
C
B
A
D
D
D
B
B
B
C
B