Conceptual Framework

Question 1

First Level of Conceptual Framework

Answer 1

The Objective - the “why” or purpose

Question 2

Second Level of Conceptual Framework

Answer 2

The Qualitative Characteristics/Elements - the bridge between 1st and 3rd levels

Question 3

Third Level of Conceptual Framework

Answer 3

Recognition, Measurement, and Disclosure Concepts - the “how” or implementation

Question 4

Qualitative Characteristics (14)

Answer 4

Relevance, Predictive, Confirmatory, Materiality, Faithful Representation, Completeness, Neutrality, Free from Errors, Comparability, Consistency, Verifiability, Timeliness, Understandability, Cost Effectiveness

Question 5

Key Assumptions/Concepts (7)

Answer 5

Economic Entity, Going Concern, Periodicity, Monetary Unit, Revenue Recognition, Expense Recognition, Full Disclosure

Question 6

Relevance

Answer 6

capable of making a difference in information users’ decisions

Question 7

Predictive Value

Answer 7

help users predict future outcomes

Question 8

Confirmatory Value

Answer 8

help users confirm or change prior assessments

Question 9

Materiality

Answer 9

omitting it or misstating it could affect users’ decisions

Question 10

Faithful Representation

Answer 10

agreement between a measure and a real-world phenomenon that the measure is supposed to represent

Question 11

Completeness

Answer 11

include all information that is necessary for faithful representation

Question 12

Neutrality

Answer 12

without bias in the selection or presentation of financial information

Question 13

Free from Errors

Answer 13

no errors or omissions in the description of the amount or the process used to report the amount

Question 14

Comparability

Answer 14

similar items are treated the same way and different items are treated differently

Question 15

Consistency

Answer 15

measured and reported the same way each period

Question 16

Verifiability

Answer 16

different measurers would reach consensus about whether it is representationally faithful

Question 17

Timeliness

Answer 17

available to decision makers in time to be capable in influencing their decisions

Question 18

Understandability

Answer 18

comprehensible to users

Question 19

Cost Effectiveness

Answer 19

consideration of the costs and value of information

Question 20

Economic Entity

Answer 20

the FS represent the business, rather than its owners

Question 21

Going Concern

Answer 21

in the absence of evidence to the contrary, the business can be reasonably expected to operate long enough to carry out its existing commitments

Question 22

Periodicity

Answer 22

the life of an enterprise can be divided into artificial time periods

Question 23

Monetary Unit

Answer 23

accounting measurements for U.S. companies are reported in dollars

Question 24

Revenue Recognition

Answer 24

criteria usually satisfied for products at point of sale

Question 25

Expense Recognition

Answer 25

record expense in the period the related revenue is recognized

Question 26

Full Disclosure

Answer 26

all information that could affect decisions should be reported