framework

Question 1

who are the users of fs as per the framework

Answer 1

potential and existing investors
lenders
other creditors

Question 2

what is the objective of fs as per framework

Answer 2

to give financial information that is useful for users when making decisions relating to providing resources to the entity

Question 3

iasb definition of liability

Answer 3

present obligation of the entity to transfer eco resource as a result of past events

to transfer an economic resource as a result of past events

Question 4

iasb definition of asset

Answer 4

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

as a result of past events

Question 5

iasb definition of equity

Answer 5

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

Question 6

what are the two fundamental qualatitve characteristics of FS? and the 4 enhancing qualatitve characteristics?

Answer 6

fundamental: relevance and faithful represantaion
enhancing:
comparability
understandibility
timeliness
verifiablity

Question 7

iasb definition of expense and income

Answer 7

expense: dec in asset or inc in liability, that result in dec in equity other than those relating to distributions to holders of equity claims
income: inc in asset or dec in liability, that result in inc in equity other than those relating to distributions to holders of equity claims

Question 8

what is recognition

Answer 8

depiction of element, in words or monetary amount, in the FS

Question 9

an asset will only be recognised if

Answer 9

-rights to future economic benefit controlled by entity as result of past events
-measured with reliability
-suffiecient app evidence of its existence

Question 10

liability will only be recognised if

Answer 10

-obligation to trasnfer resoucrses as a result of past events
-measured relaibly
-evidence of existence

Question 11

income will be recognised if

Answer 11

-increase in future eco benefit arises from increase in asset (or reduction in liabilty)
-measured reliably

Question 12

expense will be recognised if

Answer 12

-decrease in future economic benefit , by increase in liabilty or decrease in asset
-measured reliably

Question 13

what is meant by a financial position approach to recogntiion

Answer 13

A financial position approach to recognition refers to a perspective in accounting where items are recognized in the financial statements based on their impact on the financial position of a company at a specific point in time. This approach emphasizes the balance sheet and focuses on capturing the assets, liabilities, and equity that represent the financial position of an entity at a given moment.

In the context of financial position recognition, the key consideration is whether an item meets the criteria to be recognized as an asset, liability, or equity at the reporting date. This approach contrasts with a revenue or income recognition approach, which emphasizes recognizing transactions when they occur or when certain performance criteria are met.

For example, under a financial position approach, the recognition of revenue might occur when it is reasonably certain that the economic benefits associated with the transaction will flow to the entity, leading to an increase in assets (e.g., accounts receivable) or equity.

In summary, a financial position approach to recognition in accounting is centered around capturing and reflecting the financial elements that contribute to an entity’s overall financial position as of a specific reporting date, ensuring that the balance sheet accurately represents the economic resources and obligations of the company.