IFRS Conceptual Framework

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1. 2.7 15. Components of the fundamental quality of "faithful

Users of financial reports are assumed to have...: a representation": completeness, neutrality, free from error,
reasonable knowledge of business and economic activities comparability, verifiability, timeliness, understandability
2. 2.8- 16. Components of the fundamental quality of "Relevance":
What is the distinction between comparability and predictive value, confirmatory value, Materiality
consistency?: allows users to identify the similarities and 17. Confirmatory value: information that helps users confirm or
differences in economic events between companies whereas correct prior expectations
consistency is present when a company applies the same
18. Define "qualitative characteristics of accounting information":
accounting treatment to similar events from period to period
2nd level of conceptual framework; its what makes accounting
3. 2.10.1 information useful and the elements of financial statements
Expenses: outflows or other using up of assets or incurrences (assets, liabilities etc).
of liabilities
19. economic entity assumption: means 6that economic activity
4. 2.10.2 can be identified with a particular unit of accountability...the
Losses: Decreases in equity (net assets) that affect the entity company keeps its activity separate and distinct from its
during a period except those that result from expenses or owners
distribution to owners
20. going concern assumption: the company will have a long life;
5. 2.10.3 inapplicable when liquidation appears imminent
Distribution to owners: Decreases in net assets resulting from
21. How can you enhance qualitative characteristics?:
transferring assets and/or rendering services to owners
Comparability
6. 2.11.1 Verifiability
Revenues: inflows or other enhancements of assets of an Timeliness
entity or settlement of its liabilities. Understandability
7. 2.11.2 22. in addition to the first test a company delays recognition of
gains: increases in equity from peripheral or incidental revenues until....: earned
transactions except those that result from revenues or
23. In some circumstances it is justifiable to recognize
investments by owners
revenue...: during production or at the end of production but
8. 2.11.3 before sale takes place
Investments by owners: increases in net assets of a particular
24. installment sales method: company requires payment in
enterprise resulting from transfers to it from other entities of
periodic installments over a long period of time.
something of value to obtain or increase ownership interests
(equity) in it 25. The installment-sales method is one form of...: receipt of
cash basis for revenue recognition
9. 2.12.
26. Materiality: determines relevance based on both the size and
What are the four basic assumptions that underlie the
magnitude of the items effect financial statements. The info
financial accounting structure?: economic entity, going
must "make a difference" or the company need not disclose it.
concern, monetary unit, and periodicity
27. Predictive value: information that has value stemming from its
10. 2.16
ability to allow investors to form expectations about the future
What is the definition of fair value?: the price that would be
received to sell an asset or paid to transfer a liability in an 28. Representational Faithfulness: Neutral
orderly transaction between market participants at the Free from Bias
measurement date; is therefore a market-based measure Transperant
Complete
11. 2.17 what is the fair value option: the option to value assets
based on their current sell value 29. Revenues are considered earned when the company....: has
12. 2.18 substantially accomplished what it must do to be entitled to
Briefly describe the fair value hierarchy: three levels of the benefits represented by the revenues.
measurement for determining the level of subjectivity of a 30. What are the elements of Financial Statements? (7) (REAL
valuation with level 1 being the least subjective and level 3 GEL): Assets
being the most Liabilities
13. Assets are readily convertible when they are...: salable or Equity
interchangeable in an active market at readily determinable Revenues
prices without significant additional cost Expenses
Gains
14. Briefly describe the two fundamental qualities of useful
Losses
accounting information.: 1)Relevance 2)Faithful representation
31. What are the Qualitative Characteristics (R&R): Relevant
Representational Faithfulness
32. What is conceptual framework?: concepts provide guidance on (1) identifying the boundaries of financial reporting; (2) selecting the
transactions, other events, and circumstances to be represented; (3) how they should be recognized and measured; and (4) how they
should be summarized and reported
33. What is the justification for Installment sales method of recognizing revenue?: Retail companies use this method based on the high
risk of not collecting an account receivable
34. What is the justification for recognition of revenue at completion of production for certain agricultural products: this occurs when
products or other assets are salable in an active market at readily determinable prices
35. What is the justification for Recognition of revenue at completion of production for certain agricultural productsThe percentage-
of-completion basis in long-term construction contracts: justified in long term construction contracts because the earning process
is considered substantially completed at various stages of construction
36. Why is a conceptual framework necessary in financial accounting?: A well developed conceptual framework enables the FASB to
issue more useful and consistent pronouncements over time resulting in a coherent set of standards.
37. Why is the Conceptual Framework Necessary: Useful and Consistent Standards
Increases FS users Understanding and confidence
Enhances Comparability