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ACCOUNTING 200 > CONCEPTUAL FRAMEWORK > Flashcards

CONCEPTUAL FRAMEWORK Flashcards

1
Q

It provides the foundation for standards that:

A
  • contribute to transparency
  • strengthens accountability
  • contributes to economic efficiency
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2
Q

objective of general purpose financial reporting

A

To provide:

  • financial info about entity
  • is useful
  • to existing & potential people (3)
  • in making decisions about providing resources
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3
Q

Kinds of decisions to be made (1.2)

A
  • buying/selling/holding of debt instruments & equity
  • providing/settling loans & other credit
  • excising rights to vote on management’s decisions that affect the use of resources
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4
Q

Decisions depend on:

1.3

A

RETURN ON INVESTMENTS

  • dividends
  • principle & interest payments
  • market price increases
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5
Q

What assessments do they make:

1.3

A
  • will I get returns?
    (amount, timing, uncertainty of future net cash inflows)
  • is my money safe?
    (stewardship)
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6
Q

What info do they use to make assessments:

1.4

A
  • FINANCIAL POSITION
    assets & liabilities
  • STEWARDSHIP
    management’s discharge of responsibilities
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7
Q

Information about economic phenomena

A
  • resources of entity
  • claims against entity
  • stewardship
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8
Q

Shortcomings of GPFR:

6-11

A
  • not all info
  • not the value of entity
  • provides info that meets needs of max no. of users
  • additional info that is useful to particular subset.
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9
Q

Qualitative Characteristics

Fundamental

A
  • Relevant

* Faithful representation

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10
Q

Enhanced Qualitative Characteristics

A
  • Comparable
  • Timely
  • Verifiable
  • Understandable
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11
Q

Role/Purpose of the framework

A
  • assist the SB in developing standards on consistent concepts
  • assist prepares to develop accounting policies when there is no standard
  • assist all in understanding and interpreting
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12
Q

process to apply fundamental QC

A
  • ID eco phenomena & useful info
  • ID the type of info that is most relevant
  • is it available & faithfully represented
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13
Q

relevance

A

capability in making a change in decision making

  • predictive value
  • confirmatory value
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14
Q

predictive value:

A

inputs used to predict future outcomes

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15
Q

confirmatory value:

A

provides feedback

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16
Q

perfect faithful representation:

A
  • complete
  • neutral & prudence
  • free from error
17
Q

comparability

A

consistency in using same method for same items

more useful if compared to similar info

18
Q

verifiable

A

different knowledgeable & independent people reach consensus that the info is faithfully represented

19
Q

consolidated financial statements

A

group companies with a parent-subsidiary relationship

20
Q

combined financial statements

A

group companies w/o parent-subsidiary relationship.

21
Q

unconsolidated financial statements

A

group companies but are the parent company’s own statements

22
Q

ASSET DEF (2018)

A

present economic resource that is controlled by the entity as a result of a past event

23
Q

economic resource

A

right that it has potential to produce economic benefits

24
Q

rights

A
  • correspond to an obligation of another company (accounts receivable)
  • do not correspond to an obligation of another party (over own physical PPE)
  • established by contract/legislation
25
Q

potential

A

could potentially produce benefits.

26
Q

LIABILITY DEF (2018)

A

obligation to transfer economic resources of past events

27
Q

obligation

A

duty of responsibility w/o ability to avoid

28
Q

transfer of economic resources

A

cash outflows or delivery of goods & services

29
Q

EQUITY DEF (2018)

A

residual interest in an entity after liabilities have been (-) from assets (E=A-L)

30
Q

Equity claims

A

claims against entity that don’t meet def of liability

established through contract/legislation

31
Q

recognition criteria

A

include only if it meets def of elements

32
Q

derecognition criteria

A

removal of part/all of asset/liability if:

  • no longer asset (loses control)
  • no longer liability (no more obligation)
33
Q

historical cost basis

A

initial price incurred when creating asset

it is the PV of a loan- remeasured at amortized cost

34
Q

current value measurement basis

A

value currently in the market

- fair value

35
Q

fair value amount

A

amount we would receive should we sell the asset now in an orderly market.

36
Q

value in use

A

estimated amount expected to be derived from the use of an asset.

37
Q

offsetting

A

letting off together 2 items to present a net amount

not preferred

38
Q

ALL QC

A
  • faithful representation
  • relevance
  • comparability
  • verifiability
  • understandability
  • timely
  • free from error
  • complete
  • neutral/prudence
  • predictive value
  • confirmatory value

ACCOUNTING 200 (2 decks)

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