Conceptual Framework

Question 1

Primary Qualitative Characteristics

Answer 1

Relevance and Faithful Representation

Question 2

Financial Reporting Frameworks Objectives

Answer 2

Recognition, Measurement, Presentation and Disclosure Critera

Question 3

OCBOA

Answer 3

Other Comprehensive Basis of Accounting– special purpose, for non-public entities

Question 4

Public Entities

Answer 4

-submit statements to SEC, regulated under 1934 Securities Exchange Act, issue securities that are traded or listed on an exchange, required to apply GAAP, have securities that are not restricted to transfer

Question 5

FASB Conceptual Framework Objectives

Answer 5

Focuses on Users of Financial Statements, provides useful info to investors, creditors and lenders, provides information about a reporting entity’s economic resources and claims against entity- BS, IS, SOCF SOSE

Question 6

Relevance

Answer 6

Predictive and Confirmatory (feedback) Value, Materiality

Question 7

Faithful Representation

Answer 7

Free from error, neutral, complete

Question 8

Enhancing Qualitative Characteristics

Answer 8

Comparability, Understandable, Timely, Verifiable

Question 9

10 Key Elements for F/S

Answer 9

Assets, Liabilities, Stockholder’s Equity, Revenues, Expenses, Gains, Losses, Distributions to Owners, Distributions by Owners and Comprehensive Income

Question 10

Comprehensive Income

Answer 10

All changes in equity from non owner resources (DENT)

Question 11

Asset

Answer 11

economic resource with a probable future benefit, transaction has already occurred, can obtain benefit

Question 12

Liability

Answer 12

economic obligation in which one needs to use or transfer an asset, cannot be avoided and transaction has already occured

Question 13

Revenues

Answer 13

Inflows from primary operations

Question 14

Expenses

Answer 14

Outflows from primary operations

Question 15

Gains

Answer 15

increases in equity from incidental transactions

Question 16

Losses

Answer 16

Decreases in equity from incidental transactions

Question 17

Capital Maintenance Concept

Answer 17

only recognize an event when an asset is sold or a liability is incurred

Question 18

Financial Maintenance Concept

Answer 18

recognize an event as a change in the value of an A or L occurs (recognize holding gains/losses) - marketable securities

Question 19

Recognition Criteria

Answer 19

Recognize when : meets the definition of an element, measurable in monetary terms, relevant/faithful (useful)

Question 20

Financial Instrument

Answer 20

COD- cash, evidence of ownership interest in an entity (SE Equity), Derivative—- imposes contractual rights and obligations

Question 21

Recognition

Answer 21

Earned ( earnings process is complete), Realizable ( collect cash or a claim to cash)

Question 22

Right of Return

Answer 22

If returns are reasonable estimable, use an allowance, can book sale. If not estimable, cannot book until right of return has expired.

Question 23

Risks and Disclousres

Answer 23

Requires disclosure as of date of statement. 4 areas 1) nature of operations - how entity generated revenue 2) use of estimates (actual results may differ) 3) certain significant estimates )possible loss, unestimatable items 4) current vulnerability associated with concentrations- not diversified

Question 24

Summary of Significant Accounting Policies

Answer 24

Used to describe the choices the entity has made when it has the option to choose between 2 or more acceptable methods of accounting for an item.