F1 Conceptual Framework And Financial Reporting

Question 1

F1 M6

If a company used FIFO for years, then changes to weighted- average method the following year.

What amount before tax should be reported for the operating year of the new method in the statement of retain earnings for the change in accounting principle? If no comparitive statements was not presented

Answer 1

Compare last years inventory for both method and the difference will be adjusted in Retained Earnings.

Question 2

What is an example of method for use in

Input Method

Output Method

Answer 2

Input Method example are resource consumption, labor hour expended and cost incurred to total expected cost

Output Method example is Milestone achieved.

Question 3

Statement of Comprehensive Income has

Answer 3

Step 1 = Net Income

Step 2 Other Comprehensive Income - OCI

Question 4

What does Other Comprehensive Income represents?

Answer 4

PUFIE

P = Pension Adjustment. Gains and losses

U = Unrealized gains and losses. Available-for- sale debt securities.

F = Foreign currency items. Transaction method

I = Instruments Specific Risk

E = Effective portion of Cash Flow Hedges is in OCI. Until cash flow associated with hedged item are realized.

Question 5

For a useful financial information, the Fundamentals Qualitative characteristics are

Answer 5

1 - Relevance - that make a difference en decision making and that must be
● Predictive Value
● Confirmatory value
● Materialy

2 - Faithful Representation - is information that must be Faithful represent report economic phenomenon that must be
● Complete
● Neutral
● Free From Errors (bias)

Enhancing qualitative characters are

• Comparability
• Verifibility
• Timeliness
• Understandability

Question 6

The 5 step approach of revenue recognition

Answer 6

I STAR
I= Identify the contract with customer
S= identity the Separate performance obligation in contract
T= determine the Transaction price
A= Allocate the transaction price to the separate performance obligation
R= Recognize Revenue when or as the entity satisfies each performance obligation

Question 7

Fundamental Qualitative characteristics

Answer 7

= Relevance (PCM) - Prodictive, Confirmatory & Material
• Predictive value - predict future outcomes
• Confirmatory value - confirm evaluation value
• Materiality- Information materials omission or misstatements that change decision making.

= Faithful Representation - completely neutral is free from error.
• Complete - all information
• Neutral - free from bias
• Free from errors - no errors (materials wise)

Question 8

Enhancing Qualitive characteristics are?

Answer 8

= Compare and verify in time to understand.
- Comparability - similar information and consistency.
- Verifiability- independent observer, audited.
- Timeliness- available to users in time
- Understandability - presented clearly and concisely.