framework

Question 1

two primary qualitative characteristics

Answer 1

faithful representation and relevance

Question 2

information is relevant if_______

the components or relevance are

Answer 2

it makes a difference to decision makers
predictive value
confirmatory value
materiality

Question 3

faithful representation

Answer 3

Information faithfully represents an economic condition or situation when the reported measure and the condition or situation are in agreement. Financial information that faithfully represents an economic phenomenon portrays the economic substance of the phenomenon. Information is representationally faithful when it is complete, neutral, and free from material error. Faithful representation replaces reliability as a primary qualitative characteristic.

Question 4

faithful representations characteristics are

Answer 4

complete
neutral
free from error

Question 5

definitions:
predictive value
confirmatory value

Answer 5

Predictive value – Information has predictive value if it assists capital providers in forming expectations about future events.

Confirmatory value – Information has confirmatory value if it confirms or changes past (or present) expectations based on previous evaluations. For example, if reported earnings for a period bear out market expectations, then it has confirmatory value.

Question 6

enhancing characteristics

Answer 6

Enhancing characteristics – These are complementary to the primary characteristics and enhance the decision usefulness of financial reporting information that is relevant and faithfully represented.
1.
Comparability – The quality of information that enables users to identify similarities and differences between sets of information. Consistency in application of recognition and measurement methods over time enhances comparability.
2.
Verifiability – Information is verifiable if different knowledgeable and independent observers could reach similar conclusions based on the information.
3.
Timeliness – Information is timely if it is received in time to make a difference to the decision maker. Timeliness can also enhance the faithful representation of information.
4.
Understandability – Information is understandable if the user comprehends it within the decision context at hand. Users are assumed to have a reasonable understanding of business and accounting and are willing to study the information with reasonable diligence.

Question 7

4 assumptions

Answer 7

EGUT
entity
going concern
unit of measure
time period

Question 8

accounting principles

Answer 8

(FERM)
measurement
revenue recognition
expense recognition
full disclosure