Conceptual Framework

Question 1

Objective of financial reporting

Answer 1

To provide financial information that is useful to users in making decisions relating to providing resources to the Entity

Question 2

When is information considered useful

Answer 2

When it’s about the entity’s economic resources, claim against the entity and changes in those resources and claims

Question 3

What do decisions made by users involve

Answer 3

Buying selling hold equity and debt instruments
providing or settling loans
exercising right to vote on or otherwise influence management actions

Question 4

What does the user assess

Answer 4

Future cash flows

Question 5

Future cash flows

Answer 5

The amount, timing, and uncertainty of (the prospects for) future net cash flow inflows in the entity

Question 6

Stewardship

Answer 6

The management’s ability to effectively and efficiently perform its responsibility in using the entities resources
predicts the future
protect against unfavorable effects of economic factors
comply with laws, regulations, and contractual provisions

Question 7

Users of financial reports

Answer 7

Existing and potential investors, lenders, and other creditors who rely on general purpose financial reports for financial information

Question 8

Fundamental characteristics

Answer 8

Relevance
Faithful representation

Question 9

Relevance

Answer 9

Relevant information must have either predictive value or confirmatory value or both

Question 10

Faithful representation

Answer 10

If financial statements of free from error, neutral and complete

Question 11

Enhancing qualitative characteristics

Answer 11

Comparability
Verifiability
Timeliness
Understandability

Question 12

Comparability

Answer 12

Its ability to stand useful overtime against the financial information from other sources

Question 13

Verifiability

Answer 13

provides assurance that the information faithfully represents what it purports to be representing

Question 14

Timeliness

Answer 14

Having information available to decision-makers on times to be capable of influencing their decisions

Question 15

Understandability

Answer 15

Information that should be clearly and concisely classified characterized and presented

Question 16

Cost constraints

Answer 16

The benefit received from useful information needs to justify the cost involved in supplying the information

Question 17

Objective of financial statements

Answer 17

To provide information about the reporting entities assets liabilities Equity Income and expenses to meet objectives of Financial Reporting

Question 18

Information about POSITION

Answer 18

Assets and liabilities

Question 19

Information about PERFORMANCE

Answer 19

Income and Expenses

Question 20

Types of financial statements

Answer 20

Consolidated Financial Statements
Unconsolidated Financial Statements
Combined Financial Statements

Question 21

Consolidated Financial Statements

Answer 21

Provide information about assets, liabilities, equity, income, and expenses of both the parent and its subsidiary as a single reporting entity

Question 22

Unconsolidated financial statements

Answer 22

Provide information about assets, liabilities, equity, income, and expenses of the parent only

Question 23

Combined financial statements

Answer 23

Provide information about assets liabilities Equity Income and expenses of two or more entities that are not linked by a parent subsidiary relationship

Question 24

Asset

Answer 24

A present economic resource controlled by an entity as a result of past events

Question 25

Economic resource

Answer 25

An economic resource is a right that has the potential to produce economic benefits

Question 26

Liability

Answer 26

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

Question 27

Obligation

Answer 27

A duty or responsibility that The Entity has no practical ability to avoid
Established by contract, legislation or similar means and are legally
enforceable by the party to whom they are owed

Question 28

TRANSFER of an economic resource

Answer 28

only necessary that the obligation exists and only in one circumstance that obligation will result in the transfer

Question 29

Present obligation as a result of past events

Answer 29

the entity has already obtained economic benefits
Taken action that creates the obligation

Question 30

Consequential test

Answer 30

An entity will or may have to transfer an economic resource that it would not otherwise had to transfer

Question 31

Equity

Answer 31

The residual interest in the asset of The Entity after deducting all its liabilities

Question 32

Income

Answer 32

Increases in assets or decreases in liability that result in increases in equity, other than those relating to contribution from holders of equity claims

Question 33

Expenses

Answer 33

Decreases and assets or increases in liabilities that results in decreases in equity other than those relating to distributions to holders of equity claims

Question 34

Recognition

Answer 34

The process of capturing for inclusion in the statement of financial position or the statement of financial performance
An item that meets the definition of an element

Question 35

Recognition criteria

Answer 35

Relevant information about elements
faithful representation because the aim is to provide information that is useful to investors, lenders and other creditors

Question 36

De-recognition

Answer 36

The removal of all or part of a recognised asset or liability from an entity statement of financial position

Question 37

Measurement basis for assets

Answer 37

Historical cost = transaction-based
fair value = market-based
value in use = Entity specific
current cost = replacement entity

Question 38

Measurement basis for liabilities

Answer 38

Historical cost = transaction-based
fair value = market-based
fulfillment value = entity specific current cost = received to take on equivalent liability

Question 39

Fulfillment value

Answer 39

Reflect entity specific current expectations about the amount, timing, and uncertainty of future cash flows to fulfill a liability

Question 40

Consideration of relevance

Answer 40

Characteristics of the asset or liability
contribution to future cash flows

Question 41

Consideration of faithful representation

Answer 41

Measurement inconsistency
measurement uncertainty

Question 42

Statement of profit or loss

Answer 42

Primary source of information about an entity’s financial performance