F1: Conceptual Framework & IFRS Flashcards
What are the primary qualitative characteristics?
- Faithfully represent
- Relevant
What are the 3 ingredients of representational faithfulness?
- Accuracy
- Completeness
- Neutrality: Without Bias
What’s the risk of accounting loss?
The amount of loss that would be recognized if an asset were to become worthless
What’s the primary objective of financial reporting?
To provide information that is useful for economic decision making
What is recognition?
The process of reporting an item on the F/S
What is matching?
Recognize a cost as an expense in the same period as benefit is recognized
What is realization?
The conversion of an item or service into cash or a claim to cash
What is the concept of verifiability?
Different authorities will draw the same conclusions based on the information
Describe level 1 of reporting at fair value
- Top Level
- Unadjusted quoted prices for identical assets or liabilities in active markets.
Describe level 2 of reporting at fair value
- Quoted prices for similar assets or liabilities in active markets
- Inputs that are derived from or corroborated by observable market data
Describe level 3 of reporting at fair value
- Based on management’s judgment
- Unobservable inputs for the asset
What are the 2 ingredients of relevance?
- Predictive value (Consistency)
- Confirmatory value (Feedback value)
What are enhancing qualitative characteristics?
CUT like V
- Comparability (Consistency)
- Understandability
- Timeliness
- Verifiability
What is comprehensive income?
All changes to equity other than owner-related items.
What are the 4 elements of comprehensive income?
- Revenues: Inflows from primary operations
- Expenses: Outflows from primary operations
- Gains: ↑ in equity from incidental transactions
- Losses: ↓ in equity from incidental transactions
