Ch 1 Flashcards
What chapter forms the foundation of the Conceptual Framework?
objective of general purpose financial reporting
What is the objective of general purpose financial reporting? (What number is this?)
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)
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?)
False, it can’t require reporting entities to provide internal information and must rely on general purpose financial report. (1.4)
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?)
Yes (1.6)
The decision relating to
providing resources to the entity depend on the __________ for example, _________________ (what number is this)
returns that existing and potential investors, lenders and other creditors expect,
dividends, principal and interest payments or market price increases.
(1.3)
To make the assessment, existing and potential investors and other creditors need information about: (what number is this)
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)
Investors, lenders and other creditors expectations about returns on their ________________ and _____________. They need information to ____________ (What number is this)
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)
General purpose financial report are _________ of a reporting entity, but they ______________________. (what number is this)
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)
Individual primary users have different and possibly conflicting, information needs and desires. True or false? (What number is this)
True (1.8)
The Board, in developing Standards, will seek to ___________________. However focusing on common information needs ___________________. (What number is this)
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
The management of a reporting entity is also _____________. However management need not rely on _____________ because it is __________________. (what number is this)
interested in financial information about reporting entity
General purpose financial reports
able to obtain the financial information it needs internally.
1.9
Other parties such as ___________ other than investors, lenders and other creditors may also find ___________. However those reports are not ______________ (What number is this)
regulators and members of the public
general purpose financial report useful
primarily directed to these other groups
1.10
To a large extent, financial reports are based on _________,____________,&___________ rather than exact depictions. The Conceptual Framework establishes the
concepts that underlie those 3.
estimates, judgements and
models (1.11)
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
unlikely (1.11)
Throughout the Conceptual Framework, these terms refer to general purpose financial reports and general purpose financial reporting unless specifically indicated otherwise.
‘financial reports’ and ‘financial reporting’
Throughout the Conceptual Framework, this term refers to the reporting entity unless specifically indicated otherwise.
entity
Throughout the Conceptual Framework, this term refers to management and the governing board of an entity unless specifically indicated otherwise.
management
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.
‘primary users’ and ‘users’
General purpose financial reports provide information about the financial
position of a reporting entity, which is information about the entity’s
__?? .
economic resources and the claims against the reporting entity (1.12)
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.
effects of transactions and other
events (1.12)
Information about the ____________________? can help users to identify the reporting entity’s financial strengths and weaknesses.
nature and amounts of a reporting entity’s economic resources and claims (1.13)
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.
liquidity and solvency
needs for additional financing
management’s stewardship
(1.13)
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.
priorities and payment requirements
(1.13)
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.
economic resources
accounts receivable
(1.14)
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.
False
They cannot be identified
and users need to know
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.
financial performance
issuing debt or equity instruments
(1.15)
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.
return
(1.16)
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.
predicting the entity’s future returns
(1.16)
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.
Accrual accounting
(1.17)
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.
changes
net cash inflows
(1.18)
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 _______________________________?
entity’s ability to generate net cash inflows.
(1.19)
Information about a reporting entity’s cash flows during a period also helps
users to assess the entity’s ability to _____________________________?.
generate future net cash inflows and to
assess management’s stewardship of the entity’s economic resources.
(1.20)
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.
Information about a reporting entity’s cash flows during a period
(1.20)
Information about how ____________ the reporting entity’s management has discharged its responsibilities to __________________ (What number is this)
efficiently and effectively
use the entity’s economic resources helps users to assess management’s stewardship of those resources.
1.22
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.
the reportin entity’s economic resources and claims may also change
these info are necessary to users
(1.21)
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)
information
assessing the entity’s prospects for future net cash
inflows
1.22
Examples of management’s responsibilities to use the entity’s economic
resources include ____________________ (What number is this?)
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
