Chapter 2

Question 1

conceptual framework

Answer 1

establishes the concepts that underlie financial reporting.

Question 2

The first level

Answer 2

1.the objective of financial reporting,

Question 3

First Level: Basic Objective

Answer 3

is the foundation of the conceptual framework. Other aspects of the framework flow logically from the objective.

Question 4

Relevance

Answer 4

to have it, accounting information must be capable of making a difference in a decision.

Question 5

Faithful representation

Answer 5

means that the numbers and descriptions match what really existed or happened

Question 6

SFAC no.1

Answer 6

objectives of financial reporting (superseded by SFAC no.8)

Question 7

SFAC No.2

Answer 7

Qualitative characteristics of accounting information (superseded by SFAC no.8)

Question 8

SFAC no.3

Answer 8

elements of financial statements (superseded by SFAC no.6)

Question 9

SFAC no.5

Answer 9

recognition and measurements in financial statements

Question 10

SFAC no.6

Answer 10

elements

Question 11

second level

Answer 11

2. qualitative characteristics and elements of financial statements

Question 12

third level

Answer 12

3. recognition, measurement and disclsure

Question 13

Fundamental Qualities

Answer 13

Relevance and faithful representation

Question 14

Ingredients of fundamental qualities (relevance)

Answer 14

predictive value, confirmatory value, and materiality

Question 15

Ingredients of fundamental qualities(faithful representation)

Answer 15

completeness, neutrality and free from error

Question 16

enhancing qualities

Answer 16

comparability, verifiability, timeliness and understandability

Question 17

relevance

Answer 17

accounting information must be capable of making a difference in a decision

Question 18

predictive value

Answer 18

if it has value as an input to predictive processes used by investors to form their own expections about the future

Question 19

confirmatory value

Answer 19

relevant information also helps users confirm or correct prior expectations

Question 20

materiality

Answer 20

information is material if omitting or misstating it could influence decisions that users make on the basis of the reported financial information

Question 21

the underlying theme of the conceptual framework

Answer 21

decision usefulness