Modul 20.2: Financial Reporting Framwork Flashcards
What are the two fundamental qualitative characteristics that make financial information useful?
1) Relevance - fin statements are relevant if the information can influence users’ economic decisions or affect users’ evaluations of past events or forecasts of future events.
2) Faithful representation - information that is faithfully representative is complete, neutral, and free from error.
What are the four characteristics that enhance relevance and faithful representation?
1) Comparability - should be consistent across time periods
2) Verifiability - independent observes, using the same methods, obtain similar results
3) Timeliness - information is available to decision makers before the information is stale
4) Understandability - should be easy to understand.
When should an item be recognized on its financial statements?
if the future economic benefit from the item is probably and the item’s value or cost can be measured reliably.
what does accrual accrual accounting mean?
financial statements should reflect transactions at the time they actually occur, not necessarily when cash is paid.
what is going concern?
assumes the company will continue to exist for the foreseeable future.
What are the required statements under the International Accounting Standard?
1) Balance Sheet
2) Statement of comprehensive income
3) Cash flow statement
4) statement of changes in owners’ equity
5) Explanatory notes, including a summary of accounting policies
What are the 9 general features for preparing financial statements?
1) Fair presentation
2) Going concern basis
3) Accrual basis
4) Consistency
5) Materiality
6) Aggregation of similar items
7) No offsetting of assets gainst liabilities
8) Reporting frequency
9) Comparative information
What does IASB recommend about structure and content of financial statements (3 things)?
1) Classified balance sheets (current and non current assets)
2) Minimum information required
3) Comparative information.
