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ICAS - FR > Module 1 - Accounting Principles and the Conceptual Framework > Flashcards

Module 1 - Accounting Principles and the Conceptual Framework Flashcards

1
Q

UK listed companies use

A

IFRS in compliance with Companies Act 2006

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2
Q

UK unlisted companies use

A

FRS

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3
Q

IFRS amended by

A

IASB

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4
Q

FRS 102 amended by

A

FRC

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5
Q

New conceptual framework applicable from

A

1 January 2020

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6
Q

Objective of general purpose financial reporting

A

To provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity.

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7
Q

Users need information about (3)

A
  • Economic resources and claims
  • Changes in resources and claims
  • Use of economic resources
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8
Q

Conceptual framework qualitative characteristics (2)

A

Fundamental and enhancing

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9
Q

Fundamental characteristics (2)

A

Must be present for information to be useful

  • Relevance
  • Faithful representation
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10
Q

Enhancing characteristics (4)

A

Usefulness of information is enhanced by these characteristics

  • Comparability
  • Verifiability
  • Timeliness
  • Understandability
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11
Q

Relevance is.. (+ two values)

A

Capable of making a difference in the decisions made by users. This is the case if it has:

  • Predictive value
  • Confirmatory value
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12
Q

Information is material if

A

Omitting it or misstating it could influence the decisions of the primary users

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13
Q

Three characteristics of faithful representation

A
  • Complete
  • Neutral
  • Free from error
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14
Q

Neutrality is supported by

A

Prudence

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15
Q

Consistent use of accounting policies and methods helps to achieve

A

Comparability

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16
Q

Verifiability =

A

Different knowledgeable and independent observers could reach consensus that a particular depiction is a faithful representation

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17
Q

Verification can be (2)

A
  • Direct > eg counting cash

- Indirect > eg recalculation

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18
Q

Timeliness =

A

Having information available to decision makers in time to be capable of influencing their decisions

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19
Q

Information is made understandable if it is (3)

A
  • Classified
  • Characterised
  • Presented clearly and concisely
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20
Q

3 types of financial statements

A
  • Unconsolidated
  • Combined
  • Consolidated
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21
Q

Asset =

A

A present economic resource controlled by the entity as a result of past events

22
Q

Economic resource =

A

A right that has the potential to produce economic benefits

23
Q

Liability =

A

A present obligation to transfer an economic resource as a result of past events

24
Q

Obligation =

A

A duty or responsibility that an entity has no practical ability to avoid

25
Q

Equity =

A

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

26
Q

Income =

A

Increases in assets or decreases in liabilities that result in increases in equity

27
Q

Expense =

A

Decreases in assets or increases in liabilities that result in decreases in equity

28
Q

Recognition of income can be

A
  • Recognition of an asset

- Derecognition of a liability

29
Q

Recognition of expense can be

A
  • Derecognition of asset

- Recognition of liability

30
Q

Item is recognised in the financial statements if (2)

A
  • Meets the definition of an element

- Provides users with information that is relevant and a faithful representation

31
Q

Derecognition

A

Removal of all or part of a recognised asset or liability from an entity’s statement of financial position

32
Q

Derecognition of an asset

A

When control is lost

33
Q

Derecognition of a liability

A

When there is no longer a present obligation

34
Q

Two main measurement bases

A
  • Historical cost

- Current value

35
Q

Historical cost =

A

Based on transaction price when asset was acquired or created or liability was incurred

36
Q

Current value (3) =

A

Reflects changes in values

  • Fair value
  • Value in use
  • Current cost
37
Q

Fair value =

A

Price received to sell asset or paid to transfer liability

38
Q

Value in use =

A

Present value of cash flows from use and disposal of asset/ present value of resources transferred to fulfil a liability

39
Q

Current cost =

A

Cost of an equivalent asset

40
Q

IAS 2 Inventories requires measurement at

A

Lower of cost or NRV

41
Q

NRV =

A

Fair value adjusted for costs to completion and selling costs

42
Q

IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets require measurement at

A

The cost model or revaluation model

43
Q

IAS 36 Impairment of assets requires that an impaired asset is written down to higher of

A

Value in use and fair value less costs of disposal

44
Q

IAS 40 Investment Property requires measurement using

A

The cost model or fair value model

45
Q

In exceptional circumstances, the IASB may include income or expenses arising from a change in value of an asset or liability as

A

Other comprehensive income

46
Q

Financial concept of capital maintenance

A

Capital refers to the net assets or equity of the entity, profit is made if the equity increases over a period

47
Q

Physical concept of capital maintenance

A

Capital refers to the productive capacity of the entity, profit is made if the operating capacity at the end of the period is greater than at the start

48
Q

Standard for determining fair value

A

IFRS 13

49
Q

Level 1 inputs

A

Quoted price in an active market for identical assets or liabilities

50
Q

Level 2 inputs

A

Inputs other than quoted prices that are directly or indirectly observable eg quoted prices for similar assets/ liabilities in active/ inactive markets. May need to make adjustments

51
Q

Level 3 inputs

A

Unobservable inputs that cannot be sourced from the market

ICAS - FR (22 decks)

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