Conceptual and Regulatory Framework

Question 1

What is IFRS1?

Answer 1

Conceptual and Regulatory Framework

Question 2

What is the first IFRS reporting period?

Answer 2

the period covered by the first IFRS financial statements

Question 3

What is the date of transition?

Answer 3

the date at the start of the earliest period for which comparatives are provided in the first IFRS financial statements

Question 4

What are convertible loans?

Answer 4

Loans/liability that can be converted into equity

Question 5

Are preference shares assets, liabilities or equity?

Answer 5

equity

Question 6

If a leaser leases a building to someone for 5 years, who’s balance sheet will the building be in?

Answer 6

The balance sheet of the leasee

Question 7

When was the most recent Conceptual Framework for Financial Reporting published?

Answer 7

March 2018

Question 8

What are/is the purpose(s) of the Conceptual Framework?

Answer 8

• to assist in the development of IFRS/IAS
• to provide a basis for reducing alternatives
• to assist preparers of financial statements in applying international standards
• to assist auditors in forming an opinion as to whether financial statements have complied with international standards
• to assist users in interpreting financial statements

Question 9

What does the framework contain?

Answer 9

1. objective of general-purpose financial reporting
2. qualitative characteristics
3. financial statements and the reporting entity
4. elements of financial statements
5. recognition and derecognition
6. measurement
7. presentation and disclosure
8. concept of capital and capital maintenance

Question 10

What is the objective of general-purpose financial accounting?

Answer 10

to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity

Question 11

What should general purpose financial reporting provide information about?

Answer 11

the entity’s:
- financial position
- financial performance (accrual basis)
- cash flows
- changes in financial position which are not caused by financial performance (e.g share issues)
- recognise expenses once they incur (when it paid) under accrual basis

Question 12

Who are the primary users of general-purpose financial reports?

Answer 12

• existing/potential investors
• existing/potential lenders and other creditors

Question 13

Who are the other users (not listed in conceptual framework) of general-purpose financial reports?

Answer 13

• employees
• customers
• governments and their agencies
• the public

Question 14

What are the two categories of qualitative characteristics of financial information?

Answer 14

Fundamental & enhancing

Question 15

What are the fundamental characteristics of financial information?

Answer 15

Relevance (predictive or confirmatory value)
Faithful representation (complete, neutral, error-free)

Question 16

What are the enhancing characteristics of financial information?

Answer 16

Comparability

Question 17

When considering comparability as a characteristic of financial information, what the minimum amount of time for comparison?

Answer 17

1 year

Question 18

What are financial statements usually prepared on?

Answer 18

the going concern basis

Question 19

What is the going concern basis?

Answer 19

It’s when the entity is viewed as continuing in business for the foreseeable future and has neither the intention nor the need to close down or materially reduce the scale of its operations

Question 20

What are the elements of financial position?

Answer 20

Assets, liabilities and equity

Question 21

What are the elements of financial performance?

Answer 21

income & expenses

Question 22

What is an asset?

Answer 22

• A present economic resource controlled by the entity as a result of past events
• An economic resource is a right that has the potential to produce economic benefits

Question 23

What is a liability?

Answer 23

• A present obligation of the entity to transfer an economic resource as a result of past events

Question 24

What is equity?

Answer 24

The residual interest in the assets of the entity after deducting all its liabilities

Question 25

What is income?

Answer 25

Increases in assets
Decreases in liabilities
Result in increases in equity
Other the those relating to contributions from holders of equity claims

Question 26

What are expenses?

Answer 26

Decreases in assets
Increases in liabilities
Results in decreases in equity
Other than those relating to distributions to holders of equity claims