Chapter 1-Conceptual Framework & IFRS

Question 1

Recognition criteria

Answer 1

• one of the financial reporting criteria

- determines what will appear on financial statements and when it will appear

Question 2

Measurement criteria

Answer 2

• one of the financial reporting criteria

- determines amount at which it will be reported

Question 3

Presentation criteria

Answer 3

• one of the financial reporting criteria

- determines where it will appear on financial statements

Question 4

Disclosure criteria

Answer 4

• one of the financial reporting criteria

- determines what information and how much info must be provided

Question 5

Qualitative characteristics that make information useful

Answer 5

Relevance (Rogers PC but Materialistic)

Faithful Representation (FENCe)

Enhancing Qualitative Characteristics (CUT like a V)

Constraint: Cost/Benefit

Question 6

Full set of Financial statement

Answer 6

Statement of financial position (Balance Sheet)

Statement of Earnings/Comprehensive Income

Statement of Cashflows

Statement of changes in Equity

Question 7

Elements of financial accounting

Answer 7

1. Assets
2. Liability
3. Equity
   
   4. Investment by owner
   5. Distribution to owners
   6. Comprehensive Income
      
      7. Revenues
      8. Expenses
      9. Gains
      10. Loss

Question 8

Financial reporting framework criterias

Answer 8

Recognition criteria
Measurement criteria
Presentation criteria
Disclosure criteria

Question 9

Recognize

Answer 9

To book an element

Question 10

Realize

Answer 10

When you meet the definition of the element

Ie: asset=

Question 11

Historical cost

Answer 11

Cost of item; what you paid for

Question 12

Replacement cost

Answer 12

What you could buy an item for today

What you could but it for today to replace the old

Question 13

Fair Market Value (FMV)

Answer 13

Price that would be received on a sale

Question 14

Relevance

Answer 14

-A qualitative characteristic that makes information useful

Includes:
Predictive Value
Confirmatory Value
Materialistic

(Roger’s PC but Materialistic)

Question 15

Faithful Representation

Answer 15

-A qualitative characteristic that makes information useful

Includes:
Free from error
Neutral w/out Bias
Completeness

(FENCe)

Question 16

Enhancing qualitative characteristics

Answer 16

Comparability
Understandability
Timeliness
Verifiability

Subject to cost/benefit constraint

Question 17

Fair Value Measurement steps

Answer 17

1. Identify asset/liability
2. Determine principal/most advantageous market
3. Determine valuation premise
4. Determine appropriate valuation technique
5. Obtain inputs for valuation
6. Calculate the fair value is asset/liability

Question 18

Impairment losses

Answer 18

Results in reduction in carrying value of an asset to its fair value in the period of the impairment

Question 19

Derivatives

Answer 19

Always reported at fair value

Ie: unrealized gains/losses

Question 20

Valuation techniques

Answer 20

Technique used to measure an items fair value (MIC):

Market approach
Income approach
Cost approach

Question 21

Market Approach

Answer 21

If using information generated by market transactions that involve identical/comparable asset/liability

Question 22

Income Approach

Answer 22

-a valuation technique

Analyze future amounts (revenues, cost savings, earnings)

Question 23

Cost approach

Answer 23

Measuring cost incurred to replace the benefit derived from an asset

Question 24

Levels of input

Answer 24

I. most reliable, involves use of observable data from actual market transactions in an active market with identical items

II. involves use of observable data from actual market transactions that did not occur in an active market it items are similar but not identical

III. Use of u observable data & largely based in managements judgement

Question 25

SFAC7 using Cashflows info & PV in accounting measurements

Answer 25

When assets/services are exchanged for future cash - use PV of future cash flows

Question 26

Factors of SFAC7

Answer 26

Risk
Timing
Interest amount of cash flow (traditional approach or expected approach)

Question 27

Revenue recognition (accrual accounting)

Answer 27

Revenue and gains are recognized when they are EARNED and REALIZED

Question 28

Earned (revenues recognition)

Answer 28

When earnings process is completed (goods delivered)

Question 29

Realized (revenue recognition)

Answer 29

Collection of cash or a claim to cash

Question 30

Revenue recognized when…

Answer 30

• a binding arrangement exist (signed contract)
• services rendered /delivery has occurred
• Fixed or determinable price exists
• collection is reasonable assured

Question 31

Expense recognition (accrual accounting)

Answer 31

Expense and losses are incurred when economic benefit is consumed