Problem 2: TRUE OR FALSE
Legal enforceability of a right, for example
1. The conceptual framework may be revised
from time to time. Revisions in the
conceptual framework automatically result
to changes in the standards.
ANSWER: FALSE
EXPLANATION: The conceptual framework
may be revised from time to time based on the
IASB’s experience of working with it. However,
revisions do not automatically result to changes in
the standards – not until after the IASB goes
through its due process of the exclusive ending a
standard.
PAGE/LINK/ASSUMPTION: P.G. 38.
2. According to the revised conceptual
framework , the asset is the right, while the
liability is the obligation, rather than the
ultimate inflows is the obligation, rather
than the ultimate inflows or outflows of
economic benefits resulting from the asset or
liability.
ANSWER: TRUE
EXPLANATION: asset as the right, liability
obligation.
Main changes in the definition of an asset: an asset
is the economic resource, not the ultimate inflow of
economic benefits.
Main changes in the definition of a liability:
liability is the obligation to transfer the economic
resource, not the ultimate outflow of economic
benefits.
PAGE/LINK/ASSUMPTION:
https://www.ifrs.org/-/media/project/conceptual-
framework/fact-sheet-project-summary-and-
feedback-statement/conceptual-framework-project-
summary.pdf
P.G. 70
3.
ownership, is necessary for control over an
economic resource to exist.
ANSWER: FALSE
EXPLANATION: ownership is not always
necessary for control to exist because control can
arise from other rights. (Ex. Entity A acquires a car
through bank financing. Although the bank retains
legal title over the car until full payment, the car is
nonetheless an asset of Entity A because entity A
has the exclusive right to use the car therefore
controls the benefits from it.)
PAGE/LINK/ASSUMPTION: P.G. 57
4. According to the revised conceptual
framework, an asset can exist even if the
probability that it will provide inflows of
future economic benefits is low, and even if
the asset is subject to a high measurement
uncertainty.
ANSWER: TRUE
EXPLANATION: an asset can exist even if the
probability that it will produce benefits is low,
although that low probability affects decisions on
whether the asset is to be recognized. Existence
uncertainty or low probability of
inflows/outflows of economic benefits may result
in, but does not automatically lead to, the non-
recognition of an asset or liability.
PAGE/LINK/ASSUMPTION: 56 & 66
5. According to the revised conceptual
framework, what the entity controls is the
right, and not the ultimate inflows of future
economic benefits that the economic
resource may produce.
ANSWER: TRUE
EXPLANATION: The new conceptual
framework deleted the notion of an expected
flow of future economic benefits and clarifies
that the asset is the right and not the ultimate
inflow of economic benefits from that right.
it stresses that the right is what the entity
controls and not the future economic benefits.
(ge focus ari kay ang katungod, dili ang
benipisyo.)
PAGE/LINK/ASSUMPTION: P.G. 69&70
 ANSWER:
EXPLANATION:
6. The conceptual framework defines income PAGE/LINK/ASSUMPTION:
and expenses in terms of changes in assets
and liabilities.

PROBLEM 5:
ANSWER: FALSE
EXPLANATION:
PAGE/LINK/ASSUMPTION:
1. Which of the following statements is
incorrect regarding the purpose of the
7. Not all items that meet the definition of a conceptual framework?
financial statement element are recognized;
they are recognized only if recognizing them
will also result in relevant and faithfully ANSWER: D. the conceptual framework
represented information. prescribes the concepts for both general purpose
and specific purpose financial reporting.
EXPLANATION:
ANSWER: TRUE
PAGE/LINK/ASSUMPTION:
EXPLANATION:
PAGE/LINK/ASSUMPTION: P.G. 65
2. The conceptual framework (incorrect
statement)
8. Measuring an asset at historical cost will
always result in the same carrying amount of
the asset from period to period. ANSWER: D. prevails over the PFRS in cases
of conflicts.
EXPLANATION:
ANSWER: TRUE
PAGE/LINK/ASSUMPTION:
EXPLANATION: historical cost will always
result in the same carrying amount of the asset from
period to period.
3. Which of the following is excluded from the
PAGE/LINK/ASSUMPTION: scope of the conceptual framework?
9. According to the conceptual framework,
amortized cost measurement relates to
ANSWER: C. the components of a complete set
historical cost, rather than current value.
of financial statements and their presentation
requirements.
ANSWER: EXPLANATION:
EXPLANATION: PAGE/LINK/ASSUMPTION:
PAGE/LINK/ASSUMPTION:

4. Which of the following is incorrect

regarding the objective of general purpose
10. Although the use of a single measurement
reporting?
basis improves the understandability of the
financial statements, this may not always
lead to useful information. Thus, the
ANSWER: D.
standards require different measurement
bases for different assets, liabilities, income EXPLANATION:
and expenses.
PAGE/LINK/ASSUMPTION:
 5. Which of the ff. statements best explains
why the reporting entity’s management and
ANSWER: Quantitative
government regulators are not considered
primary users under the conceptual EXPLANATION:
framework?
PAGE/LINK/ASSUMPTION:

ANSWER:
EXPLANATION:
PAGE/LINK/ASSUMPTION:

10. Which of the ff. is incorrect regarding the

6. Information about the reporting entity’s objective of general purpose financial
economic resources, claims against the statements?
reporting entity and changes in those
resources and claims is referred to in the
conceptual framework as the ANSWER: B.
EXPLANATION:
ANSWER: PAGE/LINK/ASSUMPTION: P.G. 51
EXPLANATION:
PAGE/LINK/ASSUMPTION: 11. Which of the ff. is least likely to be
considered when determining whether an
item meets the definition of an asset?
7. Entity A deliberately overstated its liabilities
from 1m to 1.2m. What qualitative
characteristics is violated? ANSWER: D.
EXPLANATION:
ANSWER: Faithfull representation PAGE/LINK/ASSUMPTION:
EXPLANATION: it violated neutrality in where it
stated that asset, liabilities, o.q, and income must
12. The revised definitions of an asset and a
not be overstated.
liability emphasize that
PAGE/LINK/ASSUMPTION: P.G.

ANSWER: A.
8. Two primary users are using the financial
EXPLANATION:
information of entity A. if user #1 concludes
that entity A’s sales has increased while user PAGE/LINK/ASSUMPTION: P.G. 71
#2 concludes that it has decreased, entity
A’s financial information is not
13. Which of the ff. is correct when determining
the existence of an asset or a liability.
ANSWER: Comparability
EXPLANATION: comparison is not uniformity. 2
ANSWER: C.
items must be similar or dissimilar.
EXPLANATION:
PAGE/LINK/ASSUMPTION:
PAGE/LINK/ASSUMPTION:

9. Materiality A is making a materiality

judgement. Entity A considers the size of the 14. Control is necessary element of an asset.
impact of an item to be material if it exceeds control means
5% of total assets. What type of materiality
assessment is this?
ANSWER: A.
EXPLANATION:
PAGE/LINK/ASSUMPTION: P.G. 57 ANSWER:
EXPLANATION:
15. An asset is an economic resource and an PAGE/LINK/ASSUMPTION:
economic resource is a right that has the
potential to produce economic benefits.
Which of the following is not one of the 20. Which of the following would not result to
potential of an economic resource to the recognition of a liability?
produce economic benefits for an entity?

ANSWER:
ANSWER:
EXPLANATION:
EXPLANATION:
PAGE/LINK/ASSUMPTION:
PAGE/LINK/ASSUMPTION:

21. Entity A determined that a previously

16. Entity A entity enters into a purchase
commitment with Entity B (a seller). Neither
party performs its obligation on the contract,
i.e., Entity A did not yet pay the purchase
price, while Entity B did not yet deliver the
goods. Which of the ff. is incorrect?
recognized asset no longer meet the
definition of an asset. Accordingly, entity A
removed the carrying amount of the asset
from the statement of financial position and
recognized it as an expense. Entity A is
applying which of the following principles?

ANSWER: ANSWER: C.
EXPLANATION: EXPLANATION:
PAGE/LINK/ASSUMPTION: PAGE/LINK/ASSUMPTION:

17. According to the revised conceptual 22. Recognizing a financial statement element
framework, an item is recognized if requires measuring it in monetary terms.
Which of the following statements is
incorrect regarding measurement?
ANSWER:
EXPLANATION:
ANSWER:
PAGE/LINK/ASSUMPTION:
EXPLANATION:
PAGE/LINK/ASSUMPTION:
18. According to the conceptual framework, an
item is recognized if it meets the definition
of an asset, liability, equity, income or 23. Effective communication makes information
expense, and recognizing it would provide more useful. Effective communication
relevant and faithful representation rather requires all of the ff. except
than relevance?

ANSWER: D. using standardized

ANSWER:
EXPLANATION:
EXPLANATION:
PAGE/LINK/ASSUMPTION:
PAGE/LINK/ASSUMPTION:

24. According to the revised conceptual

19. Which of the ff. will most likely to cause the framework, income and expenses are
non-recognition of an asset or a liability? classified as either
ANSWER: A.
EXPLANATION:
PAGE/LINK/ASSUMPTION: P.G. 74

25. Under this concept of capital maintenance,

profit is earned if net assets increased during
the period after excluding the effects of
transactions with the owners.

ANSWER:
EXPLANATION:
PAGE/LINK/ASSUMPTION:

PROBLEM 6

1. Make a list of your assets and explain

why the item in your list meet the
definition of an asset. Be sure to
consider all the three aspects in the
definition of an asset.
2. Assess whether each item in the list
qualifies for recognition in your personal
statement of financial position. Explain
why an item is or is not recognized.