Chapter 7 - The conceptual framework Flashcards
What is the purpose of the conceptual framework?
Assist the IASB to develop IFRS standards that are based on consistent concepts
Assist preparers to develop consistent accounting policies when no standards applier to a particular transaction or other event, or when a standard allows a choice of accounting policy
Assist all parties to understand and interpret IFRS standards
What is the objective of financial reporting?
Provide information about the reporting entity that is useful to users in making decisions relating to providing resources to the entity.
What is the must haves of fundamental qualitative characteristics?
Relevance
Faithful representation
What is the nice to have of fundamental qualitative charecteristics?
Comparability
Verifiability
Timeliness
Understandability
To be a faithful representation what characteristics should financial information possess?
Completeness
Neutrality
Free from error
What four enhancing characteristics does the framework identify?
Comparability
Verifiability
Timeliness
Understandability
What is the objective of financial statements?
Provide financial information that is useful to users of financial statements in assessing the prospects for future net cash inflows to the reporting entity and in assessing management’s stewardship of the entity’s economic resources
What are the elements of financial statements?
Assets
Liability
Equity
Income
Expenses
What is an asset?
A present economic resource controlled by the entity as a result of past events
What is a liability?
A present obligation of the entity to transfer an economic resource as a result of past events
What is equity?
Residual interest in the assets of the enterprise after deducting all its liabilities
In order to recognise items in the financial statements what characteristics should be satisfied?
Meets the definition of an element of the financial statements
Provides relevant information regarding the particular element
Provides a faithful representation of the particular element
What are the two way of measuring the elements?
Historical costs - price paid at acquisition
Current value - shows the value at the measurement date
What is the measurement of the elements of financial statements?
Process of determining the monetary amounts at which the element of financial statements are to be recognised and carried in the balance sheet and income statement
