Objectives and Qualitative Characteristics

Question 1

What do the FASB’s Statements of Financial Accounting Concepts comprise?

Answer 1

-Conceptual framework for financial accounting, NOT GAAP

Question 2

What is the objective of financial reporting?

Answer 2

-Providing decision useful information to capital providers

Question 3

What are the primary qualitative characteristics of financial statement information? Their breakdowns?

Answer 3

1) Relevance (Predictive value, Confirmatory value, Materiality)
2) Faithful representation (Completeness, Neutrality, Free from Error)

Question 4

What are the four enhancing qualitative characteristics?

Answer 4

1) Comparability/Consistency
2) Verifiability
3) Timeliness
4) Understandability

Question 5

Do F/S provide direct or indirect information about managerial performance?

Answer 5

-Indirect

Question 6

What happens when relevance and faithful representation conflict?

Answer 6

-A trade-off is made