Chapter 2 Conceptual Framework

Question 1

Status and purpose of conceptual framework:

Answer 1

Purpose
1. Assist the International Accounting Standards Board (Board) to develop IFRS Standards (Standards) that are based on consistent concepts;
2. Assist preparers to develop consistent accounting policies when no Standard applies to a particular transaction or other event, or when a Standard allows a choice of accounting policy; and
3. Assist all parties to understand and interpret the Standards.

Question 2

Is Conceptual Framework an Accounting Standard?

Answer 2

The Conceptual Framework is **not **a Standard. Nothing in the Conceptual Framework overrides any Standard or any requirement in a Standard.

Question 2

What is the Hierarchy of guidance to be followed by preparers of the financial statements?

Answer 2

1. PFRS or PAS
2. Judgement
   When making the judgement:
   Management shall consider the following:
   A. Requirements in other PFRS dealing with similar transactions
   B. Conceptual Framework
   Management may consider the following:
   A. Pronouncement issued by other standard setting bodies.
   B. Other accounting literature and industry practice.

Question 3

Can conceptual framework be revised?

Answer 3

Yes, it can be revised based on the Board’s experience

Question 3

What is the contribution of the Conceptual Framework to the development of Standard?

Answer 3

1. Promote transparency
2. Strengthen accountability
3. Contribute to the economic efficiency

Question 3

What is the foundation of Conceptual Framework?

Answer 3

Objective of General Purpose Financial Reporting

Question 3

What is the Objective of General Purpose Financial Reporting?

Answer 3

To provide financial information about the reporting entity

Question 4

Does the general purpose financial reporting generally designed for primary user’s only?

Answer 4

Yes, it deals with providing information that caters the common needs of primary users

Question 4

What are the qualitative characteristics of useful information?

Answer 4

It is divided into two:
1. Fundamental Qualitative Characteristics
2. Enhancing Qualitative Characteristics

Question 5

Relevant financial information is making a difference in the decision made by the users

Answer 5

Relevance
F

Question 6

Means that the financial reports which represents economic phenomena in words or numbers must faithfully represent the substance of the phenomena

Answer 6

Faithful Representation
F

Question 7

What are the 3 characteristics of Faithful Representations?

Answer 7

1. Completeness
2. Neutrality
3. Free from Error
   F

Question 8

Information has no errors

Answer 8

Free from error
F

Question 8

A neutral depiction is an information without bias in the selection or presentation of financial information

Answer 8

Neutrality
F

Question 9

A complete depiction includes all information necessary for a user to understand the phenomenon

Answer 9

Completeness
F

Question 10

An implicit qualitative characteristics related to neutrality, which is the use of caution of making judgments under conditions of uncertainty.

Answer 10

Prudence
F

Question 11

Means that different knowlegable and independent observers could reach consensus, although not necessarily complete agreement

Answer 11

Verifiability
E

Question 12

Qualitative characteristics that enables users to identify and understand similaraties in, and differences among items.

Answer 12

Comparability
E

Question 13

Having information available to decision-makers in time to be capable of influencing their decisions

Answer 13

Timelessness
E

Question 14

Information is understandable if it is classified, characterized and presented in clear and concise manner

Answer 14

Understandability