Ch.

1 - Conceptual Framework
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1. Comparability: Same principles are being used with business 18. Neutrality: Free from bias.
enterprises in similar industry 19. Physical Capital Maintenance Concept: An event is
2. Completeness: All information necessary to users is provided. recognized when an asset is sold or a liability is settled.
3. Confirmatory Value (Feedback Value): Confirm or correct 20. Predictive Value: Helping decision makers predict or forecast
prior predictions future results
4. Consistency: Same accounting methods in different periods. 21. Principal Market: The market where the greatest volume and
5. Cost Approach: A valuation technique that uses the current cost level of activity occurs.
of replacing the service capacity of an asset. 22. Realization: Converting non-cash resources into cash or a
6. Cost/Benefit Constraint: Cost of obtaining and presenting claim to cash.
information should not exceed the benefits 23. Recognition: Reporting an item in the financial statements
7. Emerging Issues Task Force (EITF): A board created by FASB to (booking it).
address new and unusual financial transactions. 24. Relevance: Capable of making difference in a user's decision
8. Enhancing Qualitative Characteristics of accounting making process. Made up of Predictive value and
information include: CUT - V (Cut like a V). Comparability Confirmatory value. Materiality should also be considered,
(Consistency), Understandability, Timeliness, Verifiability which relates to relevance. (Roger is PC).
9. Faithful Representation: Information depicts what it intends to 25. Special Purpose Financial Reporting Framework: A financial
represent. Consists of Free from Error, Neutrality, and reporting framework other than GAAP or IFRS, used for the
Completeness. Mnemonic: FENCe preparation of financial statements.
10. Financial Accounting Standards Board (FASB): The board that 26. Timeliness: Information is available in a timely fashion to
is responsible for maintaining the FASB Accounting Standards influence decisions.
Codification, the only authoritative source of GAAP, through 27. Understandability: Classifying, characterizing and presenting
the issuance of Accounting Standards Updates (ASUs) and is info clearly and concisely.
responsible for issuing statements on financial accounting 28. Verifiability: Independent knowledgeable observers would
concepts (SFACs), the framework upon which GAAP is based. agree
11. Financial Capital Maintenance Concept: An event is
recognized as a change in the value of an asset or liability
occurs (recognizes holding gains and losses).
12. Generally Accepted Accounting Principles (GAAP): A
general purpose financial reporting framework set forth by the
FASB to be used for the preparation of financial statements.
13. Income Approach: A valuation technique that converts future
revenues and expenses or cash flows into a single current
amount.
14. International Financial Reporting Standards (IFRS): A general
purpose financial reporting framework that is comprehensive in
nature, established and maintained by the International
Accounting Standards (IASB) used for the preparation of
financial statements in many countries outside of the United
States and accepted, in the many cases, for financial reporting
with the US.
15. Market Approach: A valuation technique that uses prices and
relevant information from market transactions for identical or
comparable assets/liabilities.
16. Materiality: Its omission or misstatement could influence a
user's decision. (How significant an amount is in relation to the
entire picture). This relates mostly to Relevance.
17. Most Advantageous Market: The market that maximizes price
received for an asset or minimizes the price to transfer a
liability.