Conceptual Framework

Which of the following is not true concerning a conceptual framework in accounting?

• It should be a basis for standard-setting

• It should allow practical problems to be solved more quickly by reference to it.

• It should be based on fundamental truths that are derived from the laws of nature

• All of these answers are correct

What is the objective of general-purpose financial reporting?

• to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers.

• to provide companies with the option to select information that favors one set of interested parties over another

• to provide users with financial information that implies total freedom from error

• to provide a metric for financial information used to determine when the boundary between two or more entities should be disregarded and the entities considered to be a licensing arrangement

The objective of financial reporting in the International Accounting Standards Board’s (IASB’s) Conceptual Framework

• Is the foundation for the Framework.

• Includes the qualitative characteristics that make accounting information useful.

• Is found on the third level of the Framework.

• All of the choices are correct regarding the objective of financial reporting

Which of the following is a fundamental quality of useful accounting information?

• Conservatism.

• Comparability.

• Faithful representation.

• Consistency.

Which of the following is an ingredient of relevance?

• Verifiability.

• Timeliness.

• Predictive value.

• Neutrality.

Accounting information is considered to be relevant when it

• can be depended on to represent the economic conditions and events that it is intended to represent.

• is capable of making a difference in a decision.

• is understandable by reasonably informed users of accounting information.

• is verifiable and neutral.

The second level of the International Accounting Standards Board’s (IASB’s) Conceptual Framework

• focuses on the purpose of financial reporting.

• defines the ways in which the purpose of financial reporting is implemented.

• serves as a bridge between the “why” of accounting and the “how” of accounting.

• all of the choices are correct.

In the International Accounting Standards Board’s (IASB’s) Conceptual Framework, qualitative characteristics

• Are considered either fundamental or enhancing.

• Contribute to the decision-usefulness of financial reporting information.

• Distinguish better information from inferior information for decision-making purposes..

• All of the choices are correct.

Which of the following is not a basic element of financial statements?

• Assets.

• Statement of financial position.

• Expenses.

• Income.

The periodicity assumption is most closely related to

• the assumption that a company will not be sold or liquidated in the near future.

• accountants producing financial statements at arbitrary points in time.

• economic activity being identified with a particular unit of accountability.

• the idea that money is the common denominator of economic activity.