Deck 2: Conceptual Framework for Financial Reporting

Question 1

General purpose financial reporting is directed at the information needs of

A) Primary external users
B) All potential external users
C) Primary internal users
D) All internal users
E) Government entities

Answer 1

Primary external users

Question 2

Which of the following is a pervasive restraint on an entity's ability to provide useful information?

A) Legal restrictions
B) Management's desire to provide more information
C) Cost
D) Untrained personnel

Answer 2

Cost

Question 3

Which of the following is not an enhancing qualitative characteristic of financial reporting?

A) Timeliness
B) Comparability
C) Verifiability
D) Relevance

Answer 3

Relevance

Question 4

Which of the following is not an aspect of relevant financial information?

A) Predictive value
B) Neutrality
C) Confirmatory value
D) Materiality

Question 5

Financial information that is capable of affecting the decision making of financial statement users is considered

A) Relevant
B) Reliable
C) Comparable
D) Faithfully Represented

Question 6

Using the same accounting treatment for the same item in different periods is an example of

A) Comparability
B) Consistency
C) Timeliness
D) Relevance

Question 7

Which of the following is the process of determining the monetary amounts at which the elements of the financial statements are to be recognized in the financial statements?

A) Calculation
B) Recognition
C) Measurement
D) Preparation

Question 8

Entity A expects to receive $5,000,000 in tax credits if it meets its emissions regulations in the upcoming year. Should this $5,000,000 be recognized as an asset in the current year?

A) Yes
B) No

Question 9

Entity A undergoes a transaction in the current period in which the assets of the entity increase by more than liabilities (causing an increase in equity). Should this be recognized as income?

A) Yes
B) No

Question 10

Entity A undergoes a transaction in which one asset increases by the amount that another asset decreases. Should this be considered income?

A) Yes
B) No

Question 11

The Conceptual Framework is, technically, an IFRS.

Question 12

The principle of substance over form is no longer considered a separate component of faithful representation.

Question 13

If there is a conflict between a specific IFRS standard and the guidelines of the Conceptual Framework, the guidelines in the framework should take precedent over the specific IFRS standard.

Question 14

An important part of faithful representation is the principle of conservatism.

Question 15

Entity A is a growing company. Because of unfavorable market conditions that have decreased the profit margins, has produced the financial statements with a slight leaning towards providing information that would increase funding from investors and creditors, omitting several unbecoming facts. Is the information faithfully represented? Why or why not?

Question 16

An entity that has no plans or need to liquidate its operations is considered to be able to operate as a going concern.

Question 17

"Free from error", one the aspects of faithfully represented information, means that the financial information is perfectly accurate.

Question 18

Based on the definition of an expense, purchasing inventory should be considered an expense.

Question 19

Information that is used for resource allocation decisions should also be useful in measuring management performance.

Question 20

The Conceptual Framework regards losses and expenses as separate items.

Question 21

The revaluation of an asset that gives rise to equity and meets the definition of income is included in income under IFRS.

Question 22

What is faithful representation?

Question 23

What is materiality, and how does it relate to relevance?

Question 24

What is the overriding objective of general purpose financial reporting (according to the Framework)?

Question 25

Explain why accrual accounting is an important aspect of using the financial statements to assess past and future performance?