Chapter 3: Qualitative characteristics Fin. Infor of

Question 1

[C3/2]

- On what does IFRSs formulate?

Answer 1

• IFRSs are formulated on the basis of the IASB’s Conceptual Framework.
• The main underlying assumption for financial statements is going concern (действующее предприятие).

Question 2

[C3/2/2.1] What is and what is not the Conceptual Framework for financial reporting?

Answer 2

The Conceptual framework is:

• a set of principles which underpin the foundations of fin. accounting.
• a conceptual framework on which all IFRSs are based, prepared.

is not:
- An accounting standard by itself.

Question 3

[C3/2/2.2.1]What is going concern concept?

Answer 3

• One important underlying assumption for fin. statements.
• The entity is a going concern and will continue operation in the foreseeable future (12m).
• The assets of an entity should not be values at their “break-up” value.

Question 4

[C3/2/2.2.2] What is accruals basis concept?

How the transactions are recorded and reported according to accruals basis concept?

Answer 4

• The effects of transactions and other events are recognised when they occur. Not when the cash or other equivalent is received or paid.
• They are recorded in the accounting records and reported in fin. statements of the periods to which they relate.

Question 5

[C3/2/2.2.2]What is matching convention?

Answer 5

In computing profit, revenue earned must be matched against expenditure incurred in earning it.

Question 6

[C3/3]What are two fundamental qualitative characteristics?

Answer 6

• Relevance (useful, timely basis information release). It is affected by materiality of information.
• Faithful representations (complete, neutral free from error).

Question 7

[C3/3-4.2]What are 4 enhancing qualitative characteristics?

Answer 7

• Comparability and consistency (identify and understand differences and similarities).
• Verifiability (information represents the economic phenomena it purports to represent faithfully).
• Timeliness (availability of information to decision-makers in time).
• Understandability (Classifying, characterising and presenting information clearly and concisely).

Question 8

[C3/4/4.3] The business entity concept?

Answer 8

Fin. statements always treat business as a separate entity even if the law is not recognising it as a separate legal entity.