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Learning Objective 1
2) Which of the following is NOT correct about the conceptual framework in accounting?
A) It is the basis for standard-setting for accounting standard setting bodies.
B) It is based on fundamental accounting truths derived from the laws of nature.
C) It can be used to solve emerging or complex accounting problems.
D) It can be used to develop consistent and comparable accounting principles.
Answer: B
Diff: 1 Type: MC
Skill: Conceptual
Objective: 2.1 Explain the role of a conceptual framework for financial reporting and the
reasons for having conceptual frameworks.
14
© 2017 Pearson Canada Inc.
5) Provide three reasons for the importance of the conceptual framework for financial reporting.
Answer: A conceptual framework is like a strategic business plan that identifies demands of
users and how to supply a product that meets those demands.
The conceptual framework provides overall plans to guide implementation: the evaluation of
more specific accounting standards and the application of accounting standards to specific
circumstances.
As business plans, they differ in response to variations in the environments for which they are
developed, and they change from time to time to respond to changes in market conditions.
It provides the foundational principles, assumptions and principles upon which accounting
standards are built.
This foundation ensures accounting standards are consistent with each othe r (e.g. the definition
of an "asset" ensures that the accounting for fixed assets and intangible assets are based on
consistent recognition criteria).
The foundational concepts help accountants determine the appropriate accounting in
circumstances for which specific standards may not exist.
Diff: 2 Type: ES
Skill: Conceptual
Objective: 2.1 Explain the role of a conceptual framework for financial reporting and the
reasons for having conceptual frameworks.
15
© 2017 Pearson Canada Inc.
Learning Objective 2
4) Which is NOT a criteria for recognition of financial information in the IFRS Conceptual
Framework?
A) The amount is reasonably measurable.
B) The expenses should be matched with revenues.
C) The amount must be measured at historical cost.
D) Inflow or outflow of cash flows are probable.
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Objective: 2.2 Explain the rationale for each of the eight major components of these frameworks
and synthesize these components into an integrated whole.
16
© 2017 Pearson Canada Inc.
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