Intermediate Accounting 1 (AC120107)

Which statement is incorrect regarding the Conceptual Framework for Financial Reporting?

• Serves as a guide in developing future PFRSs.

• Serves as a guide in resolving accounting issues that are not addressed directly in existing PFRSs.

• Is not a PFRS and hence does not define standards for any particular measurement or disclosure issue.

• Prevails in cases where there is conflict with a PFRS.

Which of the following remains unchanged in the 2018 Conceptual Framework?

• The reporting entity

• Derecognition

• Presentation and disclosure

• Concepts of capital and capital maintenance

Which of the following is the foundation of Conceptual Framework?

• The objective of general-purpose financial reporting.

• A reporting entity concept.

• The qualitative characteristics of, and the constraint on, useful financial information.

• The elements of financial statements.

What is the objective of financial reporting as indicated in the Conceptual Framework?

• Provide information that is useful to those making investing and credit decisions.

• Provide information that is useful to management.

• Provide information about those investing in the entity.

• Provide information that is relevant to the national government.

The 'primary users' of financial information include:

I. Existing and potential investors

II. Existing and potential lenders and other creditors

III. User group such as employees, customers, government and their agencies, and the public

• I only

• I and II only

• I and III only

• I, II and III

The decisions of the 'primary users' involve:

I. Buying equity and debt instruments.

II. Selling or holding equity and debt instrument.

III. Providing or settling loans and other forms of credit.

• I only

• I and II

• III only

• I, II and III

Accounting information is considered to be relevant when it

• Is capable of making a difference in a decision.

• Is verifiable and neutral.

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

• Is understandable by reasonably informed users of accounting information.

To be a faithful representation as described in the Conceptual Framework, information must be all of the following, except:

• Complete

• Free from error

• Confirmatory

• Neutral

In analyzing company's financial statements, which financial statement would a potential investor primarily use to assess the company's liquidity and financial flexibility?

• Balance Sheet

• Income Statement

• Statement of retained earnings

• Statement of cash flows

The Conceptual Framework includes all of the following, except:

• Objective of financial reporting.

• Qualitative characteristics of accounting information.

• Elements of financial statements.

• Supplementary information.