AIS 301 Ch. 2

Question 1

predictive value

Answer 1

value as input to predictive processes used by investors to form their own expectations about future

Question 2

confirmatory value

Answer 2

relevant info helps users confirm or correct prior expectations

Question 3

Materiality

Answer 3

company-specific aspect of relevance; info is this if omitting it or misstating it could influence decisions that users make on basis of reported financial info

Question 4

Faithful representation

Answer 4

numbers & descriptions match what really existed or happened

Question 5

Completeness

Answer 5

all info that is necessary for faithful representation is provided

Question 6

Neutrality

Answer 6

company cannot select info to favor one set of interested parties over another

Question 7

Free from error

Answer 7

more accurate (faithful) representation of a financial item

Question 8

Comparability

Answer 8

identify similarities & differences in economic events between companies

Question 9

consistency

Answer 9

company applies same acct treatment to similar events from period to period

Question 10

Verifiability

Answer 10

independent measurers using same methods obtain similar results

Question 11

Timeliness

Answer 11

having info available to decision-makers before it loses its capacity to influence decisions

Question 12

Understandability

Answer 12

quality of info that lets reasonably informed users see its significance

Question 13

period costs

Answer 13

salaries, admin costs; companies charge costs in immediate period even though benefits may occur in future

Question 14

product costs

Answer 14

material, labor, overhead; companies carry costs into future periods if recognize revenue in subsequent periods