6. Normative theories of accounting - the case of conceptual framework projects Flashcards
What is Financial reporting?
Can be said to be the periodic process of providing information in financial statements about the financial position and performance of a reporting entity to users external to that entity to assist them in making informed decisions about allocating scarce resources.
What is Conceptual framework?
A coherent system of interrelated objectives and fundamentals that is expected to lead to consistent standards and that prescribes the nature, function and limits of financial accounting and financial statements.
What is Control?
From an accounting perspective, control relates to the capacity of a reporting entity to benefit from an asset and to deny or regulate the access of others to the benefit.
What is Elements of financial reporting?
Pursuant to the IASB Conceptual Framework, the elements of financial reporting are assets, liabilities, income, expenses and equity.
What is Timeliness?
Having information available to decision-makers in time to be capable of influencing their decisions.
What is Verifiability?
Refers to the ability, through consensus among measurers, to ensure that information represents what it purports to represent, or that the chosen method of measurement has been used without error or bias.
What is Materiality?
A threshold concept concerning the relevance of an event or transaction to financial statement users. Something is considered ‘material’ if its omission or misstatement could influence decisions that financial statement users make.
What is Asset?
Defined by the IASB Conceptual Framework as a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.
What is Faithful representation?
To be a perfectly faithful representation, a depiction would have three characteristics. It would be complete, neutral and free from error.
What is Going concern?
A business that functions without the threat of liquidation for the foreseeable future.
Relevance Information that will make a difference to a decision maker.
What is Decision usefulness approach?
From an accounting perspective it refers to the aim of providing accounting information so as to assist readers to make informed resource allocation decisions.
What is Stewardship?
The acceptance of a responsbility to look after, or safeguard, the assets or entitlements of identified parties.
What is Reporting entity?
When users are said to exist who do not have access to information relevant to decision making and who are judged to be dependent on general purpose financial statements, the entity is deemed to be a reporting entity.
What is Accountability?
The duty to provide an account or reckoning of those actions for which one can be held responsible.
What is Expense?
Defined in the IASB Conceptual Framework as ‘decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants’.
