Conceptual Framework

Question 1

Relevance has what qualitative characteristics

Answer 1

Predictive Value and Confirmatory Value

Question 2

Who are the users of the financial statements

Answer 2

investors, lenders and other creditors

Question 3

What are the objectives of financial reporting

Answer 3

1. to provide users of the financial statements information that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity
2. Information about a reporting entities economic resources and claims against the entity (Financial Position i.e. Balance Sheet)
3. Changes in economic resources and claims
4. Financial performance reflected by accrual accounting (this provides a better basis for assessing the entity’s past and future performance than does cash basis - income statement)
5. Financial performance reflected by past cash flow (cash flows)
6. changes in economic resources and claims, NOT resulting from financial performance (ex. issuing additional stock).