Conceptual Framework

Question 1

What is the definition of matching?

Answer 1

Recording expenses and expired costs necessary to generate revenue in the same period as the revenue

Question 2

What does FASB consider as four constraints/limitations related to required financial statement note disclosures?

Answer 2

• relevance
• cost constraint
• potential adverse consequences
• future-oriented information

Question 3

Financial statement line item explanations may require additional information for full disclosure purposes. What are some purposes for assets?

Answer 3

Assets

• the nature, quality, and location of the asset
• future cash flows
• relation to other line items
• significant contractual, statutory, regulatory, or judicial restrictions

Question 4

Financial statement line item explanations may require additional information for full disclosure purposes. What are some purposes for assets and liabilities that result from financial instruments or other contracts?

Answer 4

• contractual or legal terms
• degree of credit or nonperformance risk
• potential effect related to inability to pay or perform
• method used to determine the cash flows

Question 5

Financial statement line item explanations may require additional information for full disclosure purposes. What are some purposes for other disclosures?

Answer 5

• could include equity instrument terms or conditions
• potential effects of changing accounting methods
• breakdown of aggregated line items
• alternative measurements
• line items relation to other line items

Question 6

What does Statement of Financial Accounting Concepts (SFAC 8), Chapter 8, relate to?

Answer 6

The notes to financial statements