Conceptual Framework

Question 1

Primary Qualitative Characteristics of Accounting Information

Answer 1

• Relevance
  ○ Must be capable of making a difference in a decision
  ○ Predictive value, confirmatory value, and materiality
  
  • Faithful Representation
    ○ Completeness, neutrality, free from error
  • Comparability, Verifiability, timeliness, understandability
    Qualitative characteristics that enhance the usefulness of information that is relevant and faithfully represented

Question 2

Historical cost

Answer 2

Historical cost is most objectively determinable and proper basis for recording of many assets etc

Question 3

Revenue Recognition

Answer 3

○ Revenue is recognized when it is earned, measurable, and collectible
- Recognition is not realization. Realization is conversion of non-cash to cash

Question 4

Matching

Answer 4

Net Income or loss for an accounting period is determined by the process of associating realized revenues with those expenses and expired costs necessary to generate them

Question 5

Consistency

Answer 5

Entity employs the same accounting procedures from period to period

Question 6

Objectivity/Verifiability

Answer 6

Economic activity which underlies financial statements must not only be substantive in fact but also presented without bias so as to be subject to similar determination by other technically competent individuals

Question 7

Continuity/ Going Concern

Answer 7

Entity is assumed to have a life that is indefinite or sufficiently long for it to accomplish its objectives and fulfill its legal obligations

Question 8

Unit of Measure

Answer 8

○ Common denominator upon which all financial data are based is the monetary unit
It is assumed that the monetary unit remains stable in value so that the impact of real changes in its purchasing power remain unadjusted for in the primary financial statements

Question 9

Periodicity

Answer 9

Life of enterprise is divided into artificial time periods to facilitate reporting and decision making

Question 10

Articulation

Answer 10

• Elements of financial statements are fundamentally interrelated in two ways:
  ○ Beginning balance + changes = ending balance
  Assets = Liabilities + Equity

Question 11

Regulation S-X

Answer 11

Contains information regarding the financial statements that must be submitted to the SEC

Question 12

Regulation S-K

Answer 12

Information for filing non financial statements

Question 13

10-K

Answer 13

• Required annual report
  
  • Provides a comprehensive report of company’s business and financial condition, including audited financial statements
  • Large Accelerated Filer
    ○ 10k - 75 days, 10-q - 40 days
  • Accelerated Filer
    ○ 75 days - 10k, 40 days 10-q
  • Non accelerated filer
    90 days - 10k, 10-q - 45 days

Question 14

10-Q

Answer 14

• Required financial statements include a quarterly and end of preceding fiscal year balance sheet
  
  • If the company is subject to seasonal fluctuations, a balance sheet for the corresponding quarter of the prior fiscal year is required

Question 15

From 8-K

Answer 15

Reports current events, allowing investors to obtain information in a timely manner about events material to a company’s performance