Conceptual Framework for Financial Reporting

Question 1

Conceptual Framework Objective and Purpose

Answer 1

Objective of General Purpose Financial Reporting:

Provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors.

Help these stakeholders make decisions related to providing resources to the entity.

Question 2

Purpose of the Conceptual Framework:

Answer 2

1. Development of Standards:

Assist the IASB in developing Standards based on consistent concepts.

2. Consistent Accounting Policies:

Help preparers of financial statements develop consistent accounting policies when no Standard applies to a specific transaction or event, or when a Standard allows a choice of accounting policy.

3. Understanding and Interpreting Standards:

Aid all parties in understanding and interpreting the Standards.

Question 3

To provide financial information that is useful to users in making decision relating to providing resources to the entity.

Answer 3

Objective of Financial Reporting

Question 4

Which statement reports an entity’s economic resources and claims?

Answer 4

The statement of financial position. (SOP)

Question 5

Which statement reports changes in economic resources and claims resulting from financial performance?

Answer 5

The statement of comprehensive income (SCI)

Question 6

Which statement reports changes in cash flows?

Answer 6

The statement of cash flows.

Question 7

Which statement reports changes in economic resources and claims not resulting from financial performance?

Answer 7

The statement of changes in equity.