Conceptual Framework

Question 1

What are the Objectives of Conceptual Framework?

Answer 1

Provide useful financial info (position & performance) about entity for investors, lenders and other creditors.
Allows for assessment of stewardship of directors and economic decisions.

Question 2

What are Qualitative Characteristics of Useful Financial Info?

Answer 2

Fundamental characteristics
Enhancing characteristics

Question 3

What are Fundamental Characteristics?

Answer 3

Relevance
Faithful representation

Question 4

What are Enhancing Characteristics?

Answer 4

Verifiability
Understandability
Comparability
Timeliness

Question 5

When is an Item Recognised?

Answer 5

Item meets definition of an asset, liability, equity, income, or expense.
Probable it’s associated with any inflow/outflow of future economic benefit.
Item has cost/value that can be reliably measured.

Question 6

When is an Item Derecognised?

Answer 6

Removal of all or part of recognised asset or liability from entity’s SoFP.
Asset = all or partial control lost.
Liability = entity no longer obligated for all or part of liability.

Question 7

What is Prudence?

Answer 7

Does not allow for the understatement of assets/income or the overstatement of liabilities/expenses.
Misstatements can lead to the overstatement/understatement of income/expenses in future periods.

Question 8

What are the Elements of Financial Statements?

Answer 8

Income, expenses, assets, liabilities and equity.