GAAP Principles Flashcards
What is conceptual framework?
a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function, and limits of financial accounting statements.
What is relevance?
a fundamental qualitative characteristic describing information that makes a difference in a user’s decision. It should have predictive value, confirmatory value, or both, and be material
What is faithful representation?
a fundamental qualitative characteristic describing information that represents economic reality. It must be complete, neutral, and free from material error
What is comparability?
an enhancing qualitative characteristic of useful information that enables users to identify and understand similarities in, and differences among, items.
What is verifability?
an enhancing qualitative characteristic of useful information that means that different knowledgeable and independent users could reach a consensus that the information is faithfully represented
What is timeliness?
an enhancing qualitative characteristic of useful information that means that information is available to decision makers in time to be capable of influencing their decisions
What is understandability?
an enhancing qualitative characteristic of useful information that means that information is clearly and concisely classified, characterized, and presented
What is a cost constraint?
the pervasive constraint that ensures that the value of the information provided in financial reporting is greater than the cost of providing it
