Lesson 1 Conceptual Framework & IFRS Flashcards
What are all appropriate means of measuring an element of financial reporting in monetary terms?
Historical cost
Replacement cost
Fair Market Value
Present Value
Four Enhancing characteristics
“Cut like a V”
Comparability-can be used-to compare to compare to other companies
Understandability- a user with reasonable understanding of business can make, understand and make a decision
Timeliness- info is recent enough to make a decision
Verifiability- Independent observers reach the same conclusion
How does an item qualify for recognition on the financial statements?
Must meet the definition of an element of financial statements
🤓be measurable with reasonable reliability
🤓be relevant to users
🤓Based on information that is representationally faithful, verifiable and neutral
3 approaches to measure Fair Value
Market Approach
Income Approach
Cost Approach
Realization
Conversion of an item or service into cash or claim to cash.
When does Realization occur?
At the time that an entity converts goods or services into accounts receivables, and not necessarily when receivable is collected.
What is a valuation account
Is a separate item that reduces or increases the carrying amount of an asset. It is part of the related asset but is, itself, neither an asset or liability
When reporting items at fair value an entity is required to disclose the level of inputs used to measure fair value. Level 1 being the most reliable and level 3 being the least
What do the levels consist of ?
Level 1- consist of unadjusted quoted market prices for identical assets or liabilities in active markets
Level 2- quoted prices for similar assets or liabilities in active markets and inputs that are principally derived from or corroborated by observable market data
Level 3 - inputs based on the reporting entity’s internal data
3 basic element of financial reporting
Assets, liabilities and equity or net assets
Fair value definition
Exit price of an asset or liability, which is the amount that would be received when disposing of an asset and the amount that would be required to be paid in order to transfer a liability
What are excluded from fair value option
Leases
Accumulated other comprehensive income is reported in which financial statement?
Statement of financial position
Depreciation equipment was sold in exchange for NP what concept is being used ?
Realization
Element of Comprehensive income ?
Sales revenue
Which is a component of NI
CI = NI + OCI
