Ch 5 Exercises Flashcards
Describe two ways that a researcher could navigate to the FASB Concepts Statements.
1) Within the Codification’s “Other Sources” links
2) Under “Standards” on the FASB website
Locate the FASB Statement No. 6, Elements of Financial Statements (CON 6).
What is the definition of “expenses” in CON 6? Also, cite the paragraph source.
Paragraph 80
Outflows or other using up of assets or incurrences of liabilities from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing major or central operations.
Locate the FASB Statement No. 6, Elements of Financial Statements (CON 6).
Describe where you would go within CON 6 to find the definition of liabilities versus where you would go to find a more detailed guidance for applying this definition.
The definition of liabilities is in Paragraph 35.
Further detailed guidance for applying this transaction can be found in Paragraphs 192-211, which can be found via the Table of Contents.
Locate the FASB Statement No. 6, Elements of Financial Statements (CON 6).
How would a beginning researcher know to look for this application guidance? Using CON 6, act as though you are coaching a peer on how to navigate this guidance.
The Table of Contents, at the beginning of CON 6, and the Summary Index, at the end of CON 6, both list the paragraph sections associated with liabilities, the keyword in this case.
By looking further into the paragraphs indicated, a beginning researcher would know to look for this application guidance.
Using CON 5, answer the following: What is recognition?
The process of formally recording or incorporating an item into the financial statements of an entity as an asset, liability, revenue, expense, or the like
Using CON 5, answer the following: What is the purpose of the statements of earnings and comprehensive income? Provide the excerpted guidance that responds to this question, then also summarize the guidance using your own words.
Summary: The purpose is to show external and internal users of the financial statement’s information regarding the causes behind changes in a business’ assets and liabilities.
Summarize the four fundamental recognition criteria identified in CON 5. Cite the paragraph source for this information.
Paragraph 63
1) The item meets the definition of an element of financial statements.
2) It has a relevant attribute measurable with sufficient reliability.
3) The information about it is capable of making a difference in user
decisions.
4) The information is representationally faithful, verifiable, and neutral.
Following the four fundamental recognition criteria identified in CON 5, are several paragraphs that elaborate upon the criteria. What are the paragraph numbers that elaborate upon these four criteria?
Paragraphs 64 through 77
Using CON 7, answer the following: What is the objective of present value when used in accounting measurement at initial recognition?
Paragraph 20
The objective is to capture, to the extent possible, the economic difference between sets of future cash flows.
How is CON 8 currently organized?
CON 8 is currently organized by chapters for “conceptual framework for financial reporting”
Ch.1, The objective of general-purpose financial reporting
Ch. 3, Qualitative characteristics of useful financial information
Ch. 4, Elements of financial statements
Ch. 7, Presentation
Ch. 8, Notes to financial statements
What new chapter was most recently added to CON 8, and what is the purpose of this chapter?
Ch. 4, Elements of financial statements and Ch. 7, Presentation were most recently issued on 12/2021.
Ch. 4 replaces CON 6
Ch. 7 describes the information to be included in general purpose financial reporting.
