International Regulatory, Legal And Ethical Frameworks

Question 1

Accrual accounting

Answer 1

Reflects the effects of transactions and events in the period they occur even if resulting cash flows are in a different reporting period.

Question 2

Relevance

Answer 2

Capable of making a difference in the decisions made by users, if it has PREDICTIVE value, CONFIRMATORY value or both.

Question 3

Faithful representation

Answer 3

Financial reports represent economic phenomena in words and numbers. To be useful, financial information must not only represent relevant phenomena but it must also faithfully represent the phenomena that it purports to represent.

Question 4

Verifiability

Answer 4

Helps assure users that the information faithfully represents the economic phenomena it purports to represent.

Question 5

Timeliness

Answer 5

Having the information available to decision makers in time to be capable of influencing their decisions. Generally, the older the information is, the less useful it is.

Question 6

Understandability

Answer 6

Classifying, characterising and presenting information clearly and concisely makes it understandable.

Question 7

Going concern

Answer 7

Financial statements prepared on assumption is a going concern and will continue to operate for the foreseeable future.

Question 8

Asset

Answer 8

A RESOURCE controlled by an entity as a result of PAST EVENTS and from which FUTURE ECONOMIC BENEFITS are expected to flow to the entity.

Question 9

Liability

Answer 9

A PRESENT OBLIGATION arising from PAST EVENTS, the settlement of which is expected to result in an OUTFLOW from the entity of RESOURCES embodying economic benefits.

Question 10

EQUITY

Answer 10

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

Question 11

Conceptual framework

Answer 11

Coherent system of interrelated objectives and fundamentals that can lead to a consistent standard and that prescribes the function and limits of financial accounting and statements.

Question 12

Income

Answer 12

Increases in ECONOMIC benefits during the accounting period in the form of INFLOWS or enhancement of assets, or DECREASES of liabilities, that result in INCREASES in equity, other than those relating to contributions from equity participants.

Question 13

Expenses

Answer 13

DECREASES in economic benefits during the accounting period in the form of OUTFLOWS or depletion of assets, or INCREASES in LIABILITIES that result in DECREASES in equity, other than those relating to distributions to equity participants

Question 14

Recognition

Answer 14

Process of incorporating in the statement of financial position or the statement of comprehensive income an item that meets the definition of an ELEMENT and satisfies the recognition criteria;

• it is PROBABLE that any future economic benefit associated with the item will flow to or from the entity
• the item has a cost or value that can be measured with RELIABILITY

Question 15

Historical cost

Answer 15

ASSETS are recorded at the amount of cash or cash equivalents PAID or the fair value of the consideration given to acquire them at the time of their acquisition.

LIABILITIES are recorded at the amount of PROCEEDS received in exchange for the obligation, or in some circumstances (eg income taxes), at the amounts of cash/cash equivalents expected to be paid to satisfy the liability in the normal course of business.

Question 16

Current costs

Answer 16

ASSETS carried at the amount of CASH/cash equivalents that would have to be paid if the same or an equivalent asset was acquired currently.

LIABILITIES are carried at the undiscounted amount of cash or cash equivalents that would be required to settle the obligation currently.

Question 17

Realisable value

Answer 17

Amount of cash/cash equivalents that could be currently obtained by selling an asset in an orderly disposal.

Question 18

Settlement value

Answer 18

Undisclosed amounts of cash or cash equivalents expected to be paid to satisfy the liabilities in the normal course of business.

Question 19

Present value

Answer 19

A current ESTIMATE of the present discounted value of the FUTURE NET CASH FLOWS that the item is expected to generate in the normal course of business.

Question 20

Profit

Answer 20

• residual amount that remains after expenses (including capital maintenance) have been deducted from income.
• any amount over and above that required to maintain the capital at the beginning of the period is profit

Question 21

Financial capital maintenance

Answer 21

Profit is the increase in nominal month capital over the period

Question 22

Physical capital maintenance

Answer 22

Profit is the increase in the physical productive capacity over the period

Question 23

Substance over form

Answer 23

A faithful representation provides information about the substance of an economic phenomenon instead of merely providing information about its legal form

Question 24

Date of transition of IFRS

Answer 24

The beginning of the earliest period for which an entity presents full comparative information under IFRS in its first IFRS.

Question 25

Deemed cost

Answer 25

An amount used as a surrogate for cost or depreciated cost at a given date.

Question 26

Fair value

Answer 26

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Question 27

First IFRS statements

Answer 27

The first annual financial statements in which an entity adopts international financial reporting standards, by an explicit and unreserved statement of compliance with IFRS.

Question 28

Integrated reporting

Answer 28

Concise communication about how an organisation’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, media and long term.