{ "@context": "https://schema.org", "@type": "Organization", "name": "Brainscape", "url": "https://www.brainscape.com/", "logo": "https://www.brainscape.com/pks/images/cms/public-views/shared/Brainscape-logo-c4e172b280b4616f7fda.svg", "sameAs": [ "https://www.facebook.com/Brainscape", "https://x.com/brainscape", "https://www.linkedin.com/company/brainscape", "https://www.instagram.com/brainscape/", "https://www.tiktok.com/@brainscapeu", "https://www.pinterest.com/brainscape/", "https://www.youtube.com/@BrainscapeNY" ], "contactPoint": { "@type": "ContactPoint", "telephone": "(929) 334-4005", "contactType": "customer service", "availableLanguage": ["English"] }, "founder": { "@type": "Person", "name": "Andrew Cohen" }, "description": "Brainscape’s spaced repetition system is proven to DOUBLE learning results! Find, make, and study flashcards online or in our mobile app. Serious learners only.", "address": { "@type": "PostalAddress", "streetAddress": "159 W 25th St, Ste 517", "addressLocality": "New York", "addressRegion": "NY", "postalCode": "10001", "addressCountry": "USA" } }

2: The Conceptual Framework Flashcards

(29 cards)

1
Q

purpose of the conceptual framework

A
  1. helping the IASB develop IFRS which are based on consistent concepts
  2. assisting those preparing FS to develop consistent accounting policies where no standard applies
  3. assisting all parties to understand and interpret standards
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

status of the conceptual framework

A

not an accounting standard

looking at foundations on which financial reporting is based

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

the objective of general purpose financial reporting

A

key thing is to provide financial information

information needs to be useful to several user groups: existing/potential investors, lenders and other creditors

information on economic resources an entity has as well as claims against the entity, and how efficiently/effectively the entity’s management and governing board have run the business

accruals accounting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

2 fundamental qualitative characteristics

A

relevance

faithful interpretation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

fundamental qualitative characteristics: relevance

A

information has to have predictive, confirmatory value or both

materiality is fundamental to this - information and how relevant it is is affected by the nature of information but also materiality
- information is material if its omission or misstatement could influence the decision users make

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

fundamental qualitative characteristics: faithful representation

A

where the legal form and substance differ, it is more important that the FS shows the substance since you want a faithful representation

statements should be complete, neutral and free from error

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

4 enhancing qualitative characteristics

A

comparability

verifiability

timeliness

understanding

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

enhancing qualitative characteristics: comparability

A

information is more useful if we can compare it

consistency is about the use of the same methods for the same items from period to period within the same entity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

enhancing qualitative characteristics: verifiability

A

information must be verifiable and capable of being interrogated/tested

direct or indirect verification

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

enhancing qualitative characteristics: timeliness

A

tradeoff between having information sooner and potentially less reliable, compared to waiting longer and having it be more reliable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

enhancing qualitative characteristics: understandability

A

information should be presented in the best way possible so it is clear and concise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

cost constraint on useful financial reporting

A

cost to producing information - balance between cost of the information and its use

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

going concern

A

FS normally prepared with the underlying assumption of going concern

business expected to continue in the foreseeable future

opposite would be the break up basis where the business is in financial trouble
- all assets become current

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

5 elements of financial statements

A

assets (financial position)

liabilities (financial position)

equity (financial position)

income (financial performance)

expenses (financial performance)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

asset

A

present economic resource controlled by the entity as a result of past events

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

liability

A

present obligation of an entity to transfer an economic resource as a result of past events

17
Q

equity

A

assets - liabilities = equity

residual interest in the assets of the entity after deducting all liabilities

18
Q

income

A

increases in assets or decreases in liability that result in increases in equity, other than those relating to contributions from holders of equity claims

19
Q

expenses

A

decreases in assets or increases in liabilities that result in decreases in equity, other than those relating to distributions of holders of equity claims

20
Q

recognition criteria

A

transaction meets the definition of an element

it provides useful information
- relevant, faithful representation
- cost-effective

21
Q

derecognition

A

control of all or part of an asset is lost

no longer a present obligation in respect of all or part of a liability

22
Q

2 measurement bases defined in the conceptual framework

A

historical cost

current value (which has 3 further measurement bases)

23
Q

measurement: historical cost

A

definite and certain

historical cost + any directly attributable cost to get it to where it needs to be and set up where it needs to be

24
Q

measurement: current value

A

fair value

value in use (for assets) and fulfilment value (for liabilities)

current cost

25
current value: fair value
price you expect to receive if you sell an asset or the amount you expect to pay if you transfer a liability in an orderly transaction sometimes no market exists - look at future cash flows and discount them to adjust for time value of money more judgemental but more relevant
26
current value: value in use (assets) and fulfilment value (liabilities)
present value of future cash flows fulfilment value as the present value of the cash you have to pay to effectively get out of the liability
27
current value: current cost
what would it cost you to buy an equivalent asset more relevant but less reliable
28
2 concepts relating to capital
1. financial concept of capital - capital as net assets or equity of an entity 2. physical concept of capital - capital as the productive capacity/capability of the entity
29
capital maintenance
profit results if physical productive capacity of the business is greater at year-end than it was at the beginning of the year, excluding shareholder transactions