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Financial Accounting and Reporting > CONCEPTUAL FRAMEWORK > Flashcards

CONCEPTUAL FRAMEWORK Flashcards

1
Q

BASIC CONCEPT

Summary of Terms and CONCEPTS that underlie the preparation and presentation of FInancial Statements.

A

Conceptual Framework

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2
Q

BASIC CONCEPT

Concerned with GENERAL PURPOSE FINANCIAL STATEMENTS, including consolidated financial statements.

A

Conceptual Framework

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3
Q

Special purpose reports are still under the scope of the framework.

A

FALSE

OUTSIDE the scope of framework.

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4
Q

What is the underlying theme of the framework?

Significant basis ng conceptual framework

A

Decision usefulness in making economic decision

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5
Q

Enumeration

BASIC PURPOSES OF THE FRAMEWORK

Generally speaking

A
  1. To Guide in developing future PFRS
  2. To Guide in resolving accounting issues not in the PFRS
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6
Q

Enumeration

SPECIFIC PURPOSES OF FRAMEWORK

A
  1. To assist the IASB in developing IFRS
  2. Preparers of Financial Statements
  3. To understand and interpret the standards
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7
Q

Basic Concept

Considered as the “Mother Standard” Equivalent to Philippine Constitution, iikot sa Decision Usefulness

A

Conceptual Framework

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8
Q

Identification

“Accounting postulates” are the basic notions or fundamental premises on which the accounting process is based.

A

Underlying Assumptions

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9
Q

Enumeration

What are the underlying assumptions under the OLD Conceptual Framework?

GAMET

A

Going Concern
Accrual Principle
Monetary Unit Priniciple
Economic Entity Concept
Time period principle

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10
Q

Enumeration

What are the underlying assumptions under the NEW Conceptual Framework?

A

Going Concern Principle

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11
Q

CHAPTER 1

OBJECTIVE OF FINANCIAL REPORTING (Foundation of CF)
OVERALL

A

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

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12
Q

CHAPTER 1

CHAPTER 1: OBJECTIVE OF FINANCIAL REPORTING (Foundation of CF)
SPECIFIC

A

Provide information:
1. Resources
2. Assessing future net cash flows
3. Resources (Assets), Claims (Liability) , Changes in resources and claims.

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13
Q

CHAPTER 1, Enumeration

Limitations

A

General Purpose financial reports DO NOT:
1. provide ALL infomration
2. not designed to show value of entity, only estimate
3. accomodate every request of information
4. based on estimate and judgement rather than exact depiction.

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14
Q

CHAPTER 2, Qualitative Charactersitics of useful information

Classification of Qualitative Characteristics

A
  1. Fundamental
  2. Enhancing Qualitative Characteristics
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15
Q

CHAPTER 2, Qualitative Charactersitics of useful information

Characteristics ADDRESS the content or substance of information.

A

Fundamental Characteristics

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16
Q

CHAPTER 2, Qualitative Charactersitics of useful information

What are the fundametal charactersitics

Enumeration

A
  1. Relevance
  2. Faithful representation
17
Q

CHAPTER 2, Qualitative Charactersitics of useful information

The capacity of information to make a difference in a decision made by users.

A

Relevance

18
Q

CHAPTER 2, Qualitative Charactersitics of useful information

Ingredients of Relevance

Enumeration

A

Predictive Value
Confirmitory Value

19
Q

CHAPTER 2, Qualitative Charactersitics of useful information

This information can help users increase the likelihood of correctly PREDICTING or FORECASTING outcome of events.

A

Predictive Value

20
Q

CHAPTER 2, Qualitative Charactersitics of useful information

This information enables users to CONFIRM or CORRECT earlier expectations.

A

Confirmatory Value

21
Q

CHAPTER 2, Qualitative Charactersitics of useful information

Specific aspect of relevance, besides from predictive and confirmatory value.

A

Materiality

22
Q

CHAPTER 2, Qualitative Charactersitics of useful information

All material items are RELEVANT but not all relevant items are material.

A

TRUE

23
Q

CHAPTER 2, Qualitative Charactersitics of useful information

it reasonably be expected to influence the economic decisions based on judgement.
Factors to be considered:
1. Relative size of the item
2. Nature of the item

A

Materiality

24
Q

CHAPTER 2, Qualitative Charactersitics of useful information

Information provides true, correct and complete depiction of the economic phenomena that it puports to represent.

A

Faithful representatoin

25
Q

CHAPTER 2, Qualitative Charactersitics of useful information

Faithful representation ingredients

enumeration

A

Completeness
Neutrality
Free from Error

26
Q

CHAPTER 2, Qualitative Charactersitics of useful information

Specific aspects of Faithful representation

A

Substance over form
conservatism

27
Q

CHAPTER 2, Qualitative Charactersitics of useful information

It suggests that the true nature of a transaction or event should be reflected in the financial statements, rather than merely adhering to its legal or technical aspects.

In accounting, the principle of ____________ requires that financial statements present the economic reality of a transaction or event, even if the legal documentation may suggest a different interpretation.

A

Substance over form

28
Q

CHAPTER 2, Qualitative Charactersitics of useful information

Example of Substance over form

A

For example, let’s consider a company that enters into a** sale and leaseback arrangement for an asset. Under the legal form, the company sells the asset to another party and immediately leases it back. However, if the substance of the transaction indicates that the company effectively retains control and risks associated with the asset, the* financial statements should reflect this economic reality rather than just presenting the transaction as a sale.***

29
Q

CHAPTER 2, Qualitative Charactersitics of useful information

principle that guides the recognition and reporting of financial information. It suggests that when faced with uncertainty, accountants should err on the side of caution and recognize potential losses or liabilities rather than overstating assets or income. The ________ principle helps ensure that financial statements are more reliable, as it aims to prevent the overstatement of financial position and performance.

A

Conservatism

30
Q

CHAPTER 2, Qualitative Charactersitics of useful information

The conservatism principle helps prevent the ________ of financial results, ensuring that financial statements present a more cautious and realistic view of a company’s financial position. This is especially important when dealing with uncertainties, potential losses, or risks associated with future events. By exercising conservatism, accountants aim to avoid potential misleading information and provide a more prudent assessment of a company’s financial performance and risks.

A

Overstatement

31
Q

CHAPTER 2, Qualitative Charactersitics of useful information

Qualities of information that enhances the usefulness.

A

Enhancing characteristics

32
Q

CHAPTER 2, Qualitative Charactersitics of useful information

Enumerate the enahancing qualitative characteristics

A

Verifiability
Comparability
Understandability
Timeliness

33
Q

CHAPTER 2, Qualitative Charactersitics of useful information

means that the different knowledgeable and independent observers could reach CONCENCUS , although necesarilly complete agreement, that a particular depiction is faithful representation.

From VCUT

A

Verifiability

34
Q

Under verifiability , information is said to be ——– if it helps users identify similarities and differences between different sets of information thar are provided.

A

comparable

35
Q

What are the two different types of Comparability.

Under verifiability

A
  1. Intra-comparability
  2. Inter-comparability
36
Q

Comparability and Consistency are the same

T or F

A

False
This two are NOT the same, Comparability is the GOAL, while consistency means achieving the goal.

37
Q

It requires financial information must be comprehensible or intelligible if it is to be useful by complex matters cannot be eliminated. Because of this , framework requires the users to have REASONABLE KNOWLEDGE of business economic acivities and must review and analyze the information diligently.

Under VCUT

A

Understandability

38
Q

It means having information available to decision makers in time to influence their decisions.

A

Timeliness

Financial Accounting and Reporting (3 decks)

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