F-1 CONCEPTUAL FRAMEWORKS

Question 1

Q:Name the single source of authoritative nongovernmental U.S. GAAP.

FAR 1-1

Answer 1

The FASB “Accounting Standards Codification” (ASC).

Question 2

Q: The term “International Financial Reporting Standards” includes what standards?

FAR 1-2

Answer 2

• International Accounting Standards (IAS).
• International Financial Reporting Standards (IFRS).
• IFRIC Interpretations.
• SIC Interpretations.

Question 3

Q: Who are the primary users of general purpose financial reports?

FAR 1-3

Answer 3

Existing and potential:

• Investors
• Lenders
• Other creditors

Question 4

Q: Name the pervasive constraint on the information provided in financial reporting.

FAR 1-4

Answer 4

• Cost Constraint:*
• The benefits of reporting financial information must be greater than the costs of obtaining and presenting the information.

Question 5

Q: Name the fundamental qualitative characteristics of useful financial information.

FAR 1-5

Answer 5

Relevance and Faithful Representation.

Question 6

Q: Name the three elements of *relevance. *

Answer 6

• Predictive value
• Confirming value
• Materiality

Question 7

Q: Name the three elements of *faithful representation. *

FAR 1-7

Answer 7

• Neutrality
• Completeness
• Freedom from error

Question 8

Q: Name the enhancing qualitative characteristics of financial information.

FAR 1-8

Answer 8

• Comparability, Verifiability, Timeliness, and Understandability.

Question 9

Q: According to SFAC #5, what should a full set of financial statements include?

FAR 1-9

Answer 9

• Statement of Financial Position (the balance sheet)
• Statement of Earnings (the income statement)
• Statement of Comprehensive Income
• Statement of Cash Flows
• Statement of Changes in Owners’ Equity

Question 10

Q: What is the difference between realization and recognition?

FAR 1-10

Answer 10

• Realization: When sold and converted to cash (or claims to cash).
• Recognition: When recorded in the financial statements.

Question 11

Q: List the 10 elements of financial statements according to SFAC #6.

Hint: “CREG” and “LALEID”

FAR 1-11

Answer 11

• Comprehensive Income
• Revenues
• Expenses
• Gains

  and

• Losses
• Assets
• Liabilities
• Equity (of Net Assets)
• Investments by Owners
• Distributions to Owners

Question 12

Q: List the six elements of financial statements according to the IASB Framework.

FAR 1-12

Answer 12

• Assets
• Liabilities

• Equity

• Income (revenue and gains)
• Expenses (expenses and losses)
• Capital maintenance adjustments

Question 13

Q: Name the five elements of present value measurement per SFAC #7.

Hint: “EVTUO”

FAR 1-13

Answer 13

• Estimate of future cash flow
• Expectations about timing Variations of future cash flows
• Time value of money (the risk-free rate of interest)
• The price for bearing Uncertainty
• Other factors (e.g., liquidity issues and market imperfections)

Question 14

Q: Describe the expected cash flow approach for present value computations.

FAR 1-14

Answer 14

• Considers a range of possible cash flows and assigns a (subjective) probability to each cash flow in the range to determine the weighted-average, or “expected”, future cash flow.