Definitions

Question 1

Income definition IASB

Answer 1

Increases in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims.

Question 2

Expenses definition IASB

Answer 2

Decreases in assets or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims.

Question 3

Profit or losses definition IASB

Answer 3

Increases in equity not resulting from contributions from holders of equity claims.
Decreases in equity not resulting from distributions to holders of equity claims.

Question 4

Assets definition IASB

Answer 4

A present economic resource controlled by the entity as a result of past events.
An economic resource is a right that has the potential to produce future economic
benefits

Question 5

Liability definition IASB

Answer 5

A present obligation of the entity to transfer an economic resource as a result of past events.
An obligation is a duty or responsibility that the entity has no practical ability to avoid.

Question 6

Equity definition IASB

Answer 6

Residual interest in the assets of the entity after deducting all its liabilities

Question 7

The Conceptual Framework for Financial Reporting

Answer 7

Sets out the underlying concepts for the preparation and presentation of financial statements. It also requires that users of financial information can interpret a company’s financial statements, knowing that they have been prepared in the correct way.

Question 8

Business entity

Answer 8

Financial statements record and report on the activities of one particular entity. They do not include the personal assets or liabilities of those who own or run the entity.

Question 9

Going Concern

Answer 9

Financial statements are prepared on the assumption that the entity will remain in business for the foreseeable future

Question 10

Accruals basis

Answer 10

Transactions are recorded and reported in the financial statements of the periods to which they relate.

Question 11

Materiality

Answer 11

Information is material if omitting it or misstating it could influence decisions that users make on the basis of financial information about a specific reporting entity (materiality is an entity-specific aspect of relevance).

Question 12

Relevance (qualitative characteristic)

Answer 12

• Information capable of making a difference in the decisions made by the users
• Have predictive value
• Have confirmatory value

Question 13

Faithful representation (qualitative characteristic)

Answer 13

• information must be complete
• Neutral
• Free from error

Question 14

Recognition

Answer 14

Process of including an element in the financial statements. If they meet the definition of an asset, liability, income or expense and provide information that is useful to users.

Question 15

Measurement

Answer 15

Process of determining the money amounts at which the elements are to be recognised and carried in the financial statements.

Question 16

IAS 1

Answer 16

Presentation of Financial Statements

Question 17

IAS 16

Answer 17

Property, plant and equipment

Question 18

Leases definition (IAS16)

Answer 18

“A contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration”.

Question 19

IAS36

Answer 19

Impairment of Assets

Question 20

Property, plant and equipment (PPE)

Answer 20

Tangible items that are held for use by the
business and that are expected to be used during more than one period

Question 21

Cost (in relation to PPE)

Answer 21

Amount of cash or cash equivalents paid, or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction

Question 22

Fair value (PPE)

Answer 22

The price that would be received to sell an asset

Question 23

Depreciable amount

Answer 23

The cost of an asset less its residual value

Question 24

Residual value

Answer 24

The estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its
useful life.

Question 25

Depreciation

Answer 25

The systematic allocation of the depreciable amount of an asset over its useful life

Question 26

Useful life

Answer 26

The period over which an asset is expected to be available for use by the entity or the number of production of similar units expected to be obtained from the asset by an entity

Question 27

Carrying amount

Answer 27

The amount at which an asset is recognised after deducting any accumulated depreciation and accumulated impairment losses

Question 28

Impairment loss

Answer 28

The amount by which the carrying amount of an asset exceeds its recoverable amount

Question 29

Recoverable amount

Answer 29

The higher of an asset’s fair value less costs of disposal and its value in use.
The value in use is the amount of cash flow or other benefit that the asset will generate for the entity.

Question 30

Entity-specific value

Answer 30

The present value of the cash flows an entity expects to arise from the continuing use of an asset and from its disposal at the end of its useful life

Question 31

IAS 16 recognition rules (cost of an item of PPE recognised as an asset)

Answer 31

• It is probable that future economic benefits associated with the item will flow to the entity.
• The cost of the item can be measured reliably

Question 32

IAS 38

Answer 32

Intangible Assets

Question 33

Intangible asset

Answer 33

An identifiable non-monetary asset without
physical substance.
Asset is: “A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.”