CONCEPTUAL FRAMEWORK

Question 1

BASIC CONCEPT

Summary of Terms and CONCEPTS that underlie the preparation and presentation of FInancial Statements.

Answer 1

Conceptual Framework

Question 2

BASIC CONCEPT

Concerned with GENERAL PURPOSE FINANCIAL STATEMENTS, including consolidated financial statements.

Answer 2

Conceptual Framework

Question 3

Special purpose reports are still under the scope of the framework.

Answer 3

FALSE

OUTSIDE the scope of framework.

Question 4

What is the underlying theme of the framework?

Significant basis ng conceptual framework

Answer 4

Decision usefulness in making economic decision

Question 5

Enumeration

BASIC PURPOSES OF THE FRAMEWORK

Generally speaking

Answer 5

1. To Guide in developing future PFRS
2. To Guide in resolving accounting issues not in the PFRS

Question 6

Enumeration

SPECIFIC PURPOSES OF FRAMEWORK

Answer 6

1. To assist the IASB in developing IFRS
2. Preparers of Financial Statements
3. To understand and interpret the standards

Question 7

Basic Concept

Considered as the “Mother Standard” Equivalent to Philippine Constitution, iikot sa Decision Usefulness

Answer 7

Conceptual Framework

Question 8

Identification

“Accounting postulates” are the basic notions or fundamental premises on which the accounting process is based.

Answer 8

Underlying Assumptions

Question 9

Enumeration

What are the underlying assumptions under the OLD Conceptual Framework?

GAMET

Answer 9

Going Concern
Accrual Principle
Monetary Unit Priniciple
Economic Entity Concept
Time period principle

Question 10

Enumeration

What are the underlying assumptions under the NEW Conceptual Framework?

Answer 10

Going Concern Principle

Question 11

CHAPTER 1

OBJECTIVE OF FINANCIAL REPORTING (Foundation of CF)
OVERALL

Answer 11

To provide financial information , that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to entity.

Question 12

CHAPTER 1

CHAPTER 1: OBJECTIVE OF FINANCIAL REPORTING (Foundation of CF)
SPECIFIC

Answer 12

Provide information:
1. Resources
2. Assessing future net cash flows
3. Resources (Assets), Claims (Liability) , Changes in resources and claims.

Question 13

CHAPTER 1, Enumeration

Limitations

Answer 13

General Purpose financial reports DO NOT:
1. provide ALL infomration
2. not designed to show value of entity, only estimate
3. accomodate every request of information
4. based on estimate and judgement rather than exact depiction.

Question 14

CHAPTER 2, Qualitative Charactersitics of useful information

Classification of Qualitative Characteristics

Answer 14

1. Fundamental
2. Enhancing Qualitative Characteristics

Question 15

CHAPTER 2, Qualitative Charactersitics of useful information

Characteristics ADDRESS the content or substance of information.

Answer 15

Fundamental Characteristics

Question 16

CHAPTER 2, Qualitative Charactersitics of useful information

What are the fundametal charactersitics

Enumeration

Answer 16

1. Relevance
2. Faithful representation

Question 17

CHAPTER 2, Qualitative Charactersitics of useful information

The capacity of information to make a difference in a decision made by users.

Answer 17

Relevance

Question 18

CHAPTER 2, Qualitative Charactersitics of useful information

Ingredients of Relevance

Enumeration

Answer 18

Predictive Value
Confirmitory Value

Question 19

CHAPTER 2, Qualitative Charactersitics of useful information

This information can help users increase the likelihood of correctly PREDICTING or FORECASTING outcome of events.

Answer 19

Predictive Value

Question 20

CHAPTER 2, Qualitative Charactersitics of useful information

This information enables users to CONFIRM or CORRECT earlier expectations.

Answer 20

Confirmatory Value

Question 21

CHAPTER 2, Qualitative Charactersitics of useful information

Specific aspect of relevance, besides from predictive and confirmatory value.

Answer 21

Materiality

Question 22

CHAPTER 2, Qualitative Charactersitics of useful information

All material items are RELEVANT but not all relevant items are material.

Answer 22

TRUE

Question 23

CHAPTER 2, Qualitative Charactersitics of useful information

it reasonably be expected to influence the economic decisions based on judgement.
Factors to be considered:
1. Relative size of the item
2. Nature of the item

Answer 23

Materiality

Question 24

CHAPTER 2, Qualitative Charactersitics of useful information

Information provides true, correct and complete depiction of the economic phenomena that it puports to represent.

Answer 24

Faithful representatoin

Question 25

# CHAPTER 2, Qualitative Charactersitics of useful information Faithful representation ingredients | enumeration

Answer 25

Completeness Neutrality Free from Error

Question 26

# CHAPTER 2, Qualitative Charactersitics of useful information Specific aspects of Faithful representation

Answer 26

Substance over form conservatism

Question 27

# CHAPTER 2, Qualitative Charactersitics of useful information It suggests that the true nature of a transaction or event should be reflected in the financial statements, rather than merely adhering to its legal or technical aspects. In accounting, the principle of ____________ requires that financial statements present the economic **reality of a transaction** or event, even if the legal documentation may suggest a different interpretation.

Answer 27

Substance over form

Question 28

# CHAPTER 2, Qualitative Charactersitics of useful information Example of Substance over form

Answer 28

For example, let's consider a company that enters into a** sale and leaseback arrangement for an asset**. Under the legal form, the company sells the asset to another party and immediately leases it back. However, if the substance of the transaction indicates that the company effectively retains control and risks associated with the asset, the*** financial statements should reflect this economic reality rather than just presenting the transaction as a sale.***

Question 29

# CHAPTER 2, Qualitative Charactersitics of useful information principle that guides the recognition and reporting of financial information. It suggests that when faced with uncertainty, accountants should err on the side of caution and recognize potential losses or liabilities rather than overstating assets or income. The ________ principle helps ensure that financial statements are more reliable, as it aims to prevent the overstatement of financial position and performance.

Answer 29

Conservatism

Question 30

# CHAPTER 2, Qualitative Charactersitics of useful information The conservatism principle helps prevent the ________ of financial results, ensuring that financial statements present a more cautious and realistic view of a company's financial position. This is especially important when dealing with uncertainties, potential losses, or risks associated with future events. By exercising conservatism, accountants aim to avoid potential misleading information and provide a more prudent assessment of a company's financial performance and risks.

Answer 30

Overstatement

Question 31

# CHAPTER 2, Qualitative Charactersitics of useful information Qualities of information that enhances the usefulness.

Answer 31

Enhancing characteristics

Question 32

# CHAPTER 2, Qualitative Charactersitics of useful information Enumerate the enahancing qualitative characteristics

Answer 32

Verifiability Comparability Understandability Timeliness

Question 33

# CHAPTER 2, Qualitative Charactersitics of useful information means that the different knowledgeable and independent observers could reach CONCENCUS , although necesarilly complete agreement, that a particular depiction is faithful representation. | From VCUT

Answer 33

Verifiability

Question 34

Under verifiability , information is said to be -------- if it helps users identify similarities and differences between different sets of information thar are provided.

Answer 34

comparable

Question 35

What are the two different types of Comparability. | Under verifiability

Answer 35

1. Intra-comparability 2. Inter-comparability

Question 36

Comparability and Consistency are the same | T or F

Answer 36

False This two are NOT the same, Comparability is the GOAL, while consistency means achieving the goal.

Question 37

It requires financial information must be **comprehensible** or intelligible if it is to be useful by complex matters cannot be eliminated. Because of this , framework requires the users to have **REASONABLE KNOWLEDGE** of business economic acivities and must review and analyze the information diligently. | Under VCUT

Answer 37

Understandability

Question 38

It means having information **available** to decision makers in time to influence their decisions.

Answer 38

Timeliness