Conceptual Framework for Financial Reporting Flashcards
3 components of relevance
- Predictive value
- Confirmatory Value
- Materiality
What is the process of converting noncash resources and rights into cash or claims to cash
Realization
What is the process of formally recording or incorporating an item into the financial statements
Recognition
What is the term for all changes in net assets of an entity during a period except those resulting from investments by owners and distributions to owners
Comprehensive Income
What is the term for inflows or other enhancements of assets of an entity or settlements of its liabilities from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing operations?
Revenues
What is the term for the quality of information that helps users to increase the likelihood of correctly forecasting the outcome of past or present events
Predictive Value
Measurement method for Long-Term Receivables
Present Value of future cash flows
Measurement method for Accounts Receivable
Net realizable value or settlement rate
Measurement method for Bonds payable, due in ten years
Present value of future cash flows
Measurement method for Trading Securtities
Current Market Value
Enhancing qualitative characteristic of relevance and faithful representation
Comparability
The amount of cash, or its equivalent, that could be obtained by selling an asset in orderly liquidation
Current Market Value
3 characteristics of “Faithful Representation”
- Completeness
- Neutrality
- Free from error
Objective of financial reporting
useful decision making
2 Primary Qualitative Characteristics of Accounting Information
- Relevance
2. Faithful Representation (formally reliability)
