Conceptual Framework Flashcards
(13 cards)
What is Income?
An increase in equity not due to a transaction with the owner
What is an expense?
A decrease in equity not due to a transaction with the owner
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?
The residual interest in the assets of the entity after deducting all its liabilities
What is the fundamental characteristic of Relevance?
A characteristic that has confirmatory value and predictive value
What is the fundamental characteristic of Faithful Representation?
A characteristic where information provided is complete, neutral, and free from error
What is the enhancing characteristic of Comparability?
It’s when information is across time for one entity; and across different entities.
What is the enhancing characteristic of Verifiability?
It’s when different, knowledgeable observers would reach the same consensus.
Can be direct or indirect
What is the enhancing characteristic of Timeliness?
When information is peovided in time to influence decisions
What is the enhancing characteristic of Understandibility?
When information is presented clearly and concisely. Assumes a reasonable knowledge of business, and diligent review. May not ommit complex information.
What is a key feature of the Accrual Basis?
Revenue is recognised when earned. Expenses are recognised when incurred.
What is the key paragraph needed in asset/liability recognition
“To be recognised, x must meet the definition and also satisfy the recognition criteria, which are that recognition provides relevant information and a faithful representation”
