Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Corporate Reporting & Governance > EQL - Conceptual Framework > Flashcards

EQL - Conceptual Framework Flashcards

1
Q

What is the purpose of the framework?

A
  • IASB in developing future IFRSs and promoting harmonisation of regulations, standards etc.
  • National standard setting bodies in setting their own standards.
  • Auditors when forming an opinion on compliance with IFRSs.
  • Users interpret accounts.
  • Preparers of financial statements in applying IFRSs.
  • Provide interested parties with information about the IASB’s approach to formulating IFRSs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

If there is conflict between the Framework and an accounting standard, which one should preparers and auditors apply?

A

Follow accounting standards (IFRS)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

The framework applies to ‘general purpose financial statements’. What is included in a complete set of financial statements?

A
  • Statement of Financial Position
  • Statement of Comprehensive Position
  • Statement of Cash Flows
  • Statements of Changes in Equity
  • Notes, other statements & explanatory material
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

The Framework takes the view that, if the information needs of one particular set of users are met, then the needs of most other users are also likely to be met. Which user group is this?

A

Investors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the objectives of the International Accounting Standards Board?

A

Develop global accounting standards.
Promote the rigorous application of these standards.
Bring about the convergence of national accounting standards and IFRSs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What does IFRIC stand for?

A

International Financial Reporting Interpretations Committee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the role of the IFRIC?

A
  • Issues rapid guidance/interpretation on accounting matters
  • Previously these were known as SICs
  • FS have to comply with SIC/IFRIC to be able to state they comply with IAS/IFRS
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the 2 documents that are normally published before an IFRS is issued which generates comments and feedback from interested parties?

A
  • Discussion document/paper

- Exposure draft

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What does GAAP stand for?

A

-Generally accepted accounting principles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What makes up GAAP?

A
  • National company law.
  • National accounting standards.
  • Local stock exchange requirements.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the role of the IASB Trustees?

A

The Trustees monitor the IASB’s effectiveness, as well as raising funds and approving the Board’s budget.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the role of the International Accounting Standards Board (IASB)?

A

The Board has sole responsibility for setting accounting standards.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the objective of financial statements?

A

The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the underlying assumptions of the Framework?

A
  • Accruals Basis

- Going Concern

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the accruals concept?

A

The effects of transactions are recognised when they occur (and not when cash received) and recorded and reported in the financial statements of the periods to which they relate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the going concern concept?

A

Continuing in operation in the foreseeable future. It is assumed that the entity has neither the intention nor the necessity of liquidation or of curtailing materially the scale of its operations

17
Q

What are the 4 Qualitative Characteristics contained in the Framework?

A
  • Understandability
  • Relevance
  • Reliability
  • Comparability
18
Q

How does the Framework define relevance?

A

Information has the quality of relevance when it influences the economic decisions of users by helping them evaluate the past, present or future events or confirming, or correcting, their past evaluations.

19
Q

How does the Framework define materiality?

A

Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.

20
Q

How does the Framework define reliability?

A

Information has the quality of reliability when it is free from material error and bias and can be depended upon by users to represent faithfully that which it either purports to represent or could reasonably be expected to represent.

The information should reflect substance and economic reality over legal form, and must be neutral, prudent and complete

21
Q

What are the 5 elements of Financial Statements?

A 
Assets
Liabilities
Equity (Net Assets)
Income
Expenses
22
Q

Which of the 5 elements measure financial position?

A

Assets
Liabilities
Equity

23
Q

What is the Frameworks definition of an Asset?

A

A resource controlled by an entity as a result of a past event from which future economic benfits are expected to flow to the entity

24
Q

What is the Frameworks definition of an expense?

A

Decrease in economic benefits during accounting period from the decrease in assets or increase in liabilities, other than those relating to contributions from equity participants

25
Q

How does the Framework define ‘future economic benefit’?

A

The potential to contribute, directly or indirectly to the flow of cash or cash equivalents to the entity. The potential may be a productive one …. or may also take the form of convertibility into cash or cash equivalents or the capability to reduce cash outflows, such as when an alternative manufacturing process lowers the cost of production.

26
Q

How does the Framework define a ‘present obligation’?

A

A duty or responsibility to act or perform in a certain way. They may be legally enforceable or arise from normal business practice, custom and a desire to maintain good business relations or act in an equitable manner.

27
Q

When can an item be recognised in the financial statements?

A

Recognition is the process of incorporation in the statement of financial position or income statement of an item that meets the definition of an element and satisfies the following criteria for recognition:

  • It is probable that any future economic benefit associated with the item will flow to or from the entity; and
  • The item has a cost or value that can be measured with reliability.
28
Q

How does the Framework define ‘realisable value’?

A

Realisable value is the amount of cash or cash equivalents that could currently be obtained by selling an asset in an orderly disposal.

29
Q

How does the Framework define ‘present value’?

A

A current estimate of the present discounted value of the future net cash flows in the normal course of business.

30
Q

How does the Framework define ‘understandability’?

A

Users must be able to understand financial statements but are assumed to have some business, economic and accounting knowledge to enable them to do so. Complex matters should not be left out simply due to their difficulty.

31
Q

How does the Framework define ‘comparability’?

A

Users must be able to compare an entity’s financial statements through time and with other entities. Consistency of treatment and the disclosure of accounting policies are important. Remember that comparability is not the same as uniformity and accounting policies can be changed if they become inappropriate, but corresponding information for preceding periods should be shown to allow for comparison over time.

32
Q

How does the Framework define ‘liability’?

A

A present obligation of the entity arising from a past event where the settlement is expected to result in an outflow of economic benefits from the entity

33
Q

How does the Framework define ‘equity’?

A

The residual interest in the assets of the entity after deducting all its liabilities

34
Q

How does the Framework define ‘income’?

A

Increase in economic benefits during the accounting period from the increase in assets or decrease in liabilities, other than those relating to contributions from equity participants

Corporate Reporting & Governance (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions