Conceptual Framework and Foundational Principles Summary Flashcards
What is at the top of the conceptual framework?
User orientation - needs
What can the first level be described as?
The “why” - goals and purposes of accounting
What is at the first level?
Objectives
What are the 2 objectives at the first level?
Provide information:
1. Useful in investment and credit decisions
2. Useful in making resource allocation decisions including assessing management stewardship
What can the second level be defined as?
Bridge between levels 1 and 3
What is at the second level
Qualitative characteristics and elements
What are the 2 different kinds of qualitative characteristics at the second level?
- Fundamental
- Enhancing
What are the 2 fundamental qualitative characterstics?
- Relevance (predictive and feedback value)
- Representational faithfulness (complete, neutral, and free from error)
What are the 4 enhancing qualitative characterstics?
- Comparability (consistency)
- Verifiability
- Timeliness
- Understandability
What are the 7 elements at the second level?
- Assets
- Liabilities
- Equity
- Revenues
- Expenses
- Gains
- Losses
What can the third level be defined as?
The “how” - implementation
What is at the third level?
Foundational principles
What are the 10 foundational principles at the third level?
- Economic entity
- Control
- Revenue recognition and realization
- Matching
- Periodicity
- Monetary unit
- Going concern
- Historical cost
- Fair value
- Full disclosure
