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WorksheetsQ1: Conceptual Framework for Financial Reporting 2018
Total questions: 20
Worksheet time: 40mins
Revision of the Conceptual Framework will automatically lead to changes in Standards that are inconsistent with the revised concepts.
True
False
How does the Conceptual Framework explain the role of stewardship?
Providing information needed to assess management's stewardship is identified as an additional objective of financial reporting, equal in prominence to providing financial information useful to users in making decisions relating to providing resources to the entity
Decisions relating to providing resources to the entity depend on users' assessment of the amount, timing and uncertainty of the prospects for future net cash inflows to the entity and on their assessment of management's stewardship
Providing information needed to assess stewardship is more important than providing information needed to assess the prospects for future cash inflows to the entity
Financial reports are not intended to provide information needed to assess stewardship
When a reporting entity is not a legal entity and does not comprise only legal entities all linked by a parent-subsidiary relationship, the boundary of the reporting entity can contain an incomplete set of economic activities if that entity provides a description of how the boundary was determined
True
False
For a right to meet the definition of an asset, it needs to be likely that the right will produce economic benefits for the entity
True
False
Which factors may indicate that recognition of an item meeting the definition of an asset or a liability may not provide useful information?
Uncertainty about whether an asset or liability exists
Low probability of an inflow or outflow of economic benefits
Other factors
All of the above
None of the above.
An entity may decide to include income or expenses in other comprehensive income when doing so would result in the statement of profit or loss providing more relevant information, or providing a more faithful representation of the entity's performance for the period
True
False
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
The IASB revised the Conceptual Framework because the previous version is
no longer relevant
no longer useful
useful but needed improvements
useful but is required to be revised by legislation
Which of the following remained 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 the 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
The decisions of the ‘primary users’ involve
Buying equity and debt instruments
Selling or holding equity and debt instruments
Providing or settling loans and other forms of credit
All of the above
Which statements is false concerning users and their information needs?
Lenders are interested in information that enables them to determine whether their loans and the interest on these loans will be paid when due
The providers of risk capital and their advisers are concerned with the risk inherent in, and return provided by their investment
Government and its agencies have an interest in information about the continuance of an enterprise especially when they have long-term involvement or are dependent on the enterprise.
Employees and their representative groups are interested in information about the stability and profitability of the entity
The “fundamental” qualitative characteristics are
Relevance and reliability
Relevance and faithful representation
Timeliness and verifiability
Understandability and comparability
Qualitative characteristic that financial information must possess to be useful to the primary users of general purpose financial reports include
Timeliness
Verifiability
Understandability
Faithful representation
Qualitative characteristics that make useful information more useful include
Relevance
Faithful representation
Comparability
All of these
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
What is an entity-specific aspect of relevance?
Predictive value
Confirmatory value
Timeliness
Materiality
19. 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
Which statement is incorrect regarding prudence?
Neutrality is supported by the exercise of prudence
Prudence is the exercise of caution when making judgments under conditions of uncertainty
Prudence does not allow for overstatement of assets, liabilities, income or expenses
Prudence allows for understatement of assets, liabilities, income or expenses
Decision makers vary widely in the types of decisions they make, the methods of decision making they employ, the information they already possess or can obtain from other sources, and their ability to process information. Consequently, for information to be useful there must be a linkage between these users and the decisions they make. This link is
Relevance
Reliability
Understandability
Materiality
