Ch 1

Question 1

What chapter forms the foundation of the Conceptual Framework?

Answer 1

objective of general purpose financial reporting

Question 2

What is the objective of general purpose financial reporting? (What number is this?)

Answer 2

to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to
providing resources to the entity. Those decisions involve decisions about:

(a) buying, selling or holding equity and debt instruments;

(b) providing or settling loans and other forms of credit; or

(c) exercising rights to vote on, or otherwise influence, management’sactions that affect the use of the entity’s economic resources. (1.2)

Question 3

The potential, investors, lenders and other creditors can
require reporting entities to provide information directly to them and must not rely on general purpose financial reports for much of the financial information they need? True or False (what number is this?)

Answer 3

False, it can’t require reporting entities to provide internal information and must rely on general purpose financial report. (1.4)

Question 4

Is general purpose financial report do not and cannot provide all of the information that existing and potential investors, lenders and other
creditors need? (What number is this?)

Answer 4

Yes (1.6)

Question 5

The decision relating to
providing resources to the entity depend on the __________ for example, _________________ (what number is this)

Answer 5

returns that existing and potential investors, lenders and other creditors expect,

dividends, principal and interest payments or market price increases.

(1.3)

Question 6

To make the assessment, existing and potential investors and other creditors need information about: (what number is this)

Answer 6

the economic resources of the entity, claims agains the entity and changes in those resources and claims

how efficiently and effectively the entity’s management and governing board have discharged their responsibilities to use the entity’s economic resources

(1.4)

Question 7

Investors, lenders and other creditors expectations about returns on their ________________ and _____________. They need information to ____________ (What number is this)

Answer 7

asssesment of the amount, timing, uncertainty of the future net cash inflows of the entity

assessment of management’s stewardship of the entitys economic resources

help them make those assessments

(1.3)

Question 8

General purpose financial report are _________ of a reporting entity, but they ______________________. (what number is this)

Answer 8

not design to show the value

provide information to help existing and potential investors, lenders and other creditors to estimate the value of reporting entity.

(1.7)

Question 9

Individual primary users have different and possibly conflicting, information needs and desires. True or false? (What number is this)

Answer 9

True (1.8)

Question 10

The Board, in developing Standards, will seek to ___________________. However focusing on common information needs ___________________. (What number is this)

Answer 10

provide the information about the entity

does not prevent the reporting entity from including additional information that is most useful to a particular subset of primary users.

1.8

Question 11

The management of a reporting entity is also _____________. However management need not rely on _____________ because it is __________________. (what number is this)

Answer 11

interested in financial information about reporting entity

General purpose financial reports

able to obtain the financial information it needs internally.

1.9

Question 12

Other parties such as ___________ other than investors, lenders and other creditors may also find ___________. However those reports are not ______________ (What number is this)

Answer 12

regulators and members of the public

general purpose financial report useful

primarily directed to these other groups

1.10

Question 13

To a large extent, financial reports are based on _________,____________,&___________ rather than exact depictions. The Conceptual Framework establishes the
concepts that underlie those 3.

Answer 13

estimates, judgements and
models (1.11)

Question 14

The concepts are the goal towards which the Board and preparers of financial reports strive.
As with most goals, the Conceptual Framework’s vision of ideal financial reporting is (choose the answer correctly-> unlikely or likely?) to be achieved in full, at least not in the short term, because it takes time to understand, accept and implement new ways of analysing transactions and other events.

Nevertheless, establishing a goal
towards which to strive is essential if financial reporting is to evolve so as to
improve its usefulness.

Choose the answer and identify Which part in chapter 1

Answer 14

unlikely (1.11)

Question 15

Throughout the Conceptual Framework, these terms refer to general purpose financial reports and general purpose financial reporting unless specifically indicated otherwise.

Answer 15

‘financial reports’ and ‘financial reporting’

Question 16

Throughout the Conceptual Framework, this term refers to the reporting entity unless specifically indicated otherwise.

Answer 16

entity

Question 17

Throughout the Conceptual Framework, this term refers to management and the governing board of an entity unless specifically indicated otherwise.

Answer 17

management

Question 18

Throughout the Conceptual Framework, these terms refer to those existing and potential investors, lenders and other creditors who must rely on general purpose financial reports for much of the financial information they need.

Answer 18

‘primary users’ and ‘users’

Question 19

General purpose financial reports provide information about the financial
position of a reporting entity, which is information about the entity’s
__?? .

Answer 19

economic resources and the claims against the reporting entity (1.12)

Question 20

Financial reports also provide information about the ________________? that change a reporting entity’s economic resources and claims. Both types of information provide useful input for decisions relating to providing resources to an entity.

Answer 20

effects of transactions and other
events (1.12)

Question 21

Information about the ____________________? can help users to identify the reporting entity’s financial strengths and weaknesses.

Answer 21

nature and amounts of a reporting entity’s economic resources and claims (1.13)

Question 22

That information (about economic resources and claims of an entity) can help users to assess the reporting entity’s ________?, its __________? and how successful it is likely to be in obtaining that financing. That information can also help users to assess __________? of the entity’s economic resources.

Answer 22

liquidity and solvency
needs for additional financing
management’s stewardship
(1.13)

Question 23

Information about __________________? of existing claims helps users to predict how future cash flows will be distributed among those with a claim against the reporting entity.

Answer 23

priorities and payment requirements
(1.13)

Question 24

Different types of _________? affect a user’s assessment of the reporting entity’s prospects for future cash flows differently. Some future cash flows result directly from existing economic resources, such as _____________?. Other cash flows result from using several resources in combination to produce and market goods or services to customers.

Answer 24

economic resources
accounts receivable
(1.14)

Question 25

True or False Although those cash flows (as discussed in 1.14) can be identified with individual economic resources (or claims), users of financial reports does not need to know the nature and amount of the resources available for use in a reporting entity’s operations.

Answer 25

False They cannot be identified and users need to know

Question 26

Changes in a reporting entity’s economic resources and claims result from that entity’s _________? (see paragraphs 1.17–1.20) and from other events or transactions such as _______________? (see paragraph 1.21). To properly assess both the prospects for future net cash inflows to the reporting entity and management’s stewardship of the entity’s economic resources, users need to be able to identify those two types of changes.

Answer 26

financial performance issuing debt or equity instruments (1.15)

Question 27

Information about a reporting entity’s financial performance helps users to understand the _____? that the entity has produced on its economic resources. Information about the ____? the entity has produced can help users to assess management’s stewardship of the entity’s economic resources. Information about the variability and components of that ____? is also important, especially in assessing the uncertainty of future cash flows.

Answer 27

return (1.16)

Question 28

Information about a reporting entity’s past financial performance and how its management discharged its stewardship responsibilities is usually helpful in _________________? on its economic resources.

Answer 28

predicting the entity’s future returns (1.16)

Question 29

depicts the effects of transactions and other events and circumstances on a reporting entity’s economic resources and claims in the periods in which those effects occur, even if the resulting cash receipts and payments occur in a different period. This is important because information about a reporting entity’s economic resources and claims and changes in its economic resources and claims during a period provides a better basis for assessing the entity’s past and future performance than information solely about cash receipts and payments during that period.

Answer 29

Accrual accounting (1.17)

Question 30

Information about a reporting entity’s financial performance during a period, reflected by _______? in its economic resources and claims other than by obtaining additional resources directly from investors and creditors (see paragraph 1.21), is useful in assessing the entity’s past and future ability to generate _______?. That information indicates the extent to which the reporting entity has increased its available economic resources, and thus its capacity for generating net cash inflows through its operations rather than by obtaining additional resources directly from investors and creditors. Information about a reporting entity’s financial performance during a period can also help users to assess management’s stewardship of the entity’s economic resources.

Answer 30

changes net cash inflows (1.18)

Question 31

Information about a reporting entity’s financial performance during a period may also indicate the extent to which events such as changes in market prices or interest rates have increased or decreased the entity’s economic resources and claims, thereby affecting the _______________________________?

Answer 31

entity’s ability to generate net cash inflows. (1.19)

Question 32

Information about a reporting entity’s cash flows during a period also helps users to assess the entity’s ability to _____________________________?.

Answer 32

generate future net cash inflows and to assess management’s stewardship of the entity’s economic resources. (1.20)

Question 33

That information indicates how the reporting entity obtains and spends cash, including information about its borrowing and repayment of debt, cash dividends or other cash distributions to investors, and other factors that may affect the entity’s liquidity or solvency.

Answer 33

Information about a reporting entity’s cash flows during a period (1.20)

Question 34

Information about how ____________ the reporting entity’s management has discharged its responsibilities to __________________ (What number is this)

Answer 34

efficiently and effectively use the entity’s economic resources helps users to assess management’s stewardship of those resources. 1.22

Question 35

True or false? A reporting entity’s economic resources and claims may not change for reasons other than financial performance, such as issuing debt or equity instruments. Information about this type of change is not necessary to give users a complete understanding of why the reporting entity’s economic resources and claims changed and the implications of those changes for its future financial performance.

Answer 35

the reportin entity’s economic resources and claims may also change these info are necessary to users (1.21)

Question 36

Such _________ is also useful for predicting how efficiently and effectively management will use the entity’s economic resources in future periods. Hence, it can be useful for ______________ (What number isthis)

Answer 36

information assessing the entity’s prospects for future net cash inflows 1.22

Question 37

Examples of management’s responsibilities to use the entity’s economic resources include ____________________ (What number is this?)

Answer 37

protecting those resources from unfavourable effects of economic factors, such as price and technological changes, and ensuring that the entity complies with applicable laws, regulations and contractual provisions. 1.23