FAR - Conceptual Framework

Question 1

What are appropriate means of measuring an element of financial reporting in monetary terms?

Answer 1

1. Historical cost
2. Replacement cost
3. Fair market value
4. Net realizable value
5. Present value

Question 2

The concept of verifiability means:

Answer 2

Different authorities will draw the same conclusions based on the information, such as different sources agreeing as to an amount

Question 3

Consistency refers to?

Answer 3

The same accounting methods for the same items, either from period to period, or within a single period to all entities incorporated into the financial statement.

Question 4

Matching refers to?

Answer 4

Some expenses are recognized in the same period the entity recognizes the revenues that result directly and jointly from the same transaction as the expenses

Question 5

An item is considered material or relevant only when?

Answer 5

Only if it will influence a user of financial statements in making investment or credit decisions in relation to the reporting entity.

Question 6

FASB amends the Accounting Standards Codification through the issuance of what?

Answer 6

Accounting Standards Updates

Question 7

Fair value option accounting - how to determine the fair value of the financial asset when there is no principal market?

Answer 7

FV is measured on the basis of inputs from the most advantageous market, which is the market in which the entity’s proceeds, net of transaction and transportation costs, is the greatest. Once the amount is determined, FV does not take into account transaction costs,

Question 8

Realization concept?

Answer 8

Realization is the conversion of an item or service into cash or a claim to cash as would be the case when equipment is sold for a note receivable.