F1, M1

Question 1

Objective of General Purpose Financial Reporting

Answer 1

• Provide financial info
• Useful to primary users (External, existing and potential lenders, other creditors, stockholders, customers, investors)
• Making decisions about providing resources to the entity

Question 2

Fundamental Qualitative Characteristics

Answer 2

Relevance = Is it capable of making a difference in decisions made by users (PCM)

Faithful Representation = “reliable,” completely neutral and free from error (CNF)

Question 3

Relevance = PCM

Answer 3

Predictive value
Confirmatory value
Materiality

Question 4

Faithful Representation = CNF

Answer 4

Complete
Neutral
Free from error

Question 5

Enhancing Qualitative Characteristics

Answer 5

“Compare and verify in time to understand”

Question 6

Objectives of Financial Reporting by Nonbusiness Organizations

Answer 6

• Resources = grants or contributions
• Other than to provide goods/services for profit
• Lack ownership interests
• Users of FS = Lenders, suppliers, employees, members, constituents, governing and oversight bodies, managers
• Objectives = Resource allocation, assessing services and ability to provide services, management performance, inflows and outflows

Question 7

Recognition Criteria

Answer 7

1) Measurability
2) Relevance
3) Reliability

Question 8

Measurement Attributes for Assets and Liabilities

Answer 8

1) Historical cost = PPE
2) Current cost = Inventory
3) Net realizable value = A/R
4) Current market value = Trading/AFS
5) Present value of future cash flows = Bonds/Notes

Question 9

Comprehensive Income

Answer 9

CI = NI + OCI

Question 10

Capital Maintenance Concept

Answer 10

Recovery of cost; separation of return on capital from return of capital

Question 11

Financial Capital Concept

Answer 11

The effects of price changes on assets held and liabilities owed are recognized as “holding gains and losses” and included in return on capital

Question 12

Physical Capital Concept

Answer 12

The effect of price changes are recognized as “capital maintenance adjustments” as a separate element of equity and would not be included in return on capital

Question 13

Asset Valuation Account

Answer 13

• Separate item that reduces or increases the carrying amount of an asset
• Part of the related assets and are neither assets in their own right nor liabilities

Question 14

Interim Financial Reporting

Answer 14

“Timeliness”

Question 15

Articulation

Answer 15

FS are fundamentally interrelated

Question 16

Objectivity Principle

Answer 16

Economic activity that underlies financial statements must be substantive in fact and presented without bias