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IAS & IFRS Standards Overview > Conceptual Framework > Flashcards

Conceptual Framework Flashcards

1
Q

Theoretical principles in financial reporting?

A

Development of accounting standards

Udnerstanding and interpretation of accounting standards

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2
Q

Conceptual framework forms basis on?

A

Determining how events accounted for
How they should be measured
How they should be communicated

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3
Q

Advantages of conceptual framework?

A

Developed on same theoretical principles

Less political pressure

Principles, not large volume of rules

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4
Q

Disadvantages of a conceptual framework?

A

No framework can fit all users
Diversity of user requirements

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5
Q

Accrual accounting?

A

Transactions and events are reported in periods which effects occur. Also known as matching concept

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6
Q

Purpose of conceptual framework?

A

Help IASB develop IFRS accounting standards
Assist preparers of accounts develop accounting policies in case there is no IFRS standard

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7
Q

Objective of financial reporting?

A

Provide financial information about reporting entity that is useful to stakeholders

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8
Q

Primary users?

A

Decisions about buying, selling or holding shares or debt instruments or providing or settling loans

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9
Q

What is going concern?

A

An entity will continue in operation for the foreseeable future

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10
Q

Fundamental qualitative characteristics?

A

Relevance
Faithful representation

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11
Q

Enhancing qualitative characteristics?

A

Comparability
Verifiability
Timeliness
Understandability

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12
Q

What is relevance?

A

Information capable of making a difference in decisions made by users

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13
Q

What does consideration relate to?

A

Materiality

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14
Q

What is materiality?

A

If a mistake is reasonably expected to influence decisions of primary users

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15
Q

What is prudence?

A

Exercising caution

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16
Q

What is faithful representation?

A

Complete
Neutral
Free from error

17
Q

What is comparability?

A

Qualitative characteristics that enable users to identify and understand similarities/differences in items

18
Q

Why is a change in accounting policy changed retrospectively?

A

Results from one period to the next can be usually compared

19
Q

Does comparability = uniformity?

A

No

20
Q

What is verifiability?

A

Different knowledgeable and independent observers could reach consensus

21
Q

What is timeliness?

A

Having information available to decision-makers in time to be capable of influencing their decisions

22
Q

What is understandability?

A

Classifying, characterising and presenting information clearly and concisely

23
Q

When should an accounting policy be changed?

A

If change will result in information that is reliable and more relevant

24
Q

What is an asset?

A

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

25
Q

What is an economic resource?

A

A right that has the potential to produce economic benefits

26
Q

When does an entity control an economic resource?

A

Has the present ability to direct use of economic resource and obtain economic benefits that may flow from it

27
Q

What is a liability?

A

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

28
Q

What is meant by an obligation?

A

A duity of responsibility entity has no practical ability to avoid

29
Q

What is an equity?

A

Residual interest in assets after deducting all liabilities

30
Q

What is income?

A

Increase in assets
Decrease in liabilities that result in increase in equity

31
Q

What is expense?

A

Decrease in assets
Increase in liabilities that result in decreases in equity

32
Q

What happens when debit expense

A

Credit asset OR credit liability

33
Q

When to recognise an item?

A

Is an element (asset, liability, income, expense or equity)

Element has relevant info and has faithful representation

34
Q

When is derecognition for asset and liability?

A

Asset: When control is lost
Liability: No longer a present obligation

IAS & IFRS Standards Overview (73 decks)

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