Conceptual Framework & IFRS

Question 1

Define: Relevance

Answer 1

Capable of making a difference in a user’s decision making process. Made up of Predictive value and Comfirmatory value. Materiality should also be considered, which related to relevance (Roger is PC)

Question 2

Define: Predictive Value

Answer 2

Helping decision makers predict or forecast future results.

Question 3

Define: Confirmatory Value (Feedback Value)

Answer 3

Confirm or correct prior predictions.

Question 4

Define: Materiality

Answer 4

Its omission or misstatement could influence a user’s decision (how significant amount is in relation to the entire picture). This relates most closely to Relevance

Question 5

Define: Faithful Representation

FENCe

Answer 5

Information depicts what it intends to represent. Consist of Free from Error, Neutrality and Completeness.

Question 6

Define: Neutrality

Answer 6

Free from bias.

Question 7

Define: Completeness

Answer 7

All information necessary to users is provided.

Question 8

Enhancing Qualitative Characteristics of Accounting Information Include:

CUT like a V

Answer 8

Comparability (Consistency)
Understandability
Timeliness
Verifiability

Question 9

Define: Comparability

Answer 9

Same principles are being used with business enterprises in similar industry.

Question 10

Define: Consistency

Answer 10

Same accounting methods in different periods.

Question 11

Define: Understandability

Answer 11

Classifying, characterizing and presenting information clearly and concisely.

Question 12

Define: Timeliness

Answer 12

Information is available in a timely fashion to influence decision.

Question 13

Define: Verifiability

Answer 13

Independent knowledgeable observers would agree.

Question 14

Define: Cost/Benefit Constraint

Answer 14

Cost of obtaining and presenting information should not excees the benefits.

Question 15

Define: Physical Capital Maintenance Concept

Answer 15

An event is recognized when an asset is sold or a liability is settled.

Question 16

Define: Financial Capital Maintenance Concept

Answer 16

An event is recognized as a change in the value of an asset or liability occurs (recognizes holding gains and losses).

Question 17

Define: Recognition

Answer 17

Reporting an item in the financial statements (booking it).

Question 18

Define: Realization

Answer 18

Converting non-cash resources into cash or a claim to cash.

Question 19

Define: Principal Market

Answer 19

The market where the greatest volume and level of activity occurs.

Question 20

Define: Most Advantageous

Answer 20

The market that maximizes price received for an asset or minimizes the price to transfer a liability.

Question 21

Define: Market Approach

Answer 21

A valuation technique that uses prices and relevant information from market transactions for identical or comparable assets/liabilities

Question 22

Define: Income Approach

Answer 22

A valuation technique that converts future revenues and expenses or cash flows into a single current amount.

Question 23

Define: Cost Approach

Answer 23

A valuation technique that uses the current cost of replacing the service capacity of an asset.

Question 24

Define: Other Comprehensive Basis of Accounting (OCBOA)

Answer 24

A financial reporting framework, other than GAAP, used for the preparation of financial statements.

Question 25

Define: Generally Accepted Accounting Principles (GAAP)

Answer 25

A financial reporting framework set forth by the FASB to be used for the preparation and presentation of financial statements.

Question 26

Define: Financial Accounting Standards Board (FASB)

Answer 26

The board that is responsible for maintaining the FASB Accounting Standards Codification, the only authoritative source of GAAP, through the issuance of Accounting Standards Updates (ASUs) and is responsible for issuing statements on financial accounting concepts (SFACs), the framework upon which GAAP is based.

Question 27

Define: Emerging Issues Task Force (EITF)

Answer 27

A board created by FASB to address new and unusual financial transactions.

Question 28

Define: International Financial Reporting Standards (IFRS)

Answer 28

A comprehensive financial reporting framework established and mainteining by the International Accounting Standards Board (IASB) used for the preparation of financial statements in many countries outside of the United States and accepted, in many cases, for financial reporting with the U.S.