Summary of Conceptual Framework Flashcards
What does the conceptual framework for developing sound reporting practices start with?
The objective of financial reporting
What is the objective of financial reporting?
To provide financial information that is useful to existing and potential investors and creditors in making decisions about providing resources to the company and assessing management’s stewardship of the company’s assets
We prepare general-purpose financial statements using what basis?
The accrual basis of accounting
What do qualitative characteristics help ensure?
That the information provided in thes statements is useful
What are the 2 different kinds of qualitative characterstics?
- Fundamental qualitative characteristics
- Enhancing qualitative characteristics
What are the 2 fundamental qualitative characteristics?
- Relevance
- Faithful representation
What are the 3 attributes of relevance?
- Predictive value
- Confirmatory value
- Materiality
What are the 3 attributes of faithful representation?
- Complete
- Neutral
- Free from material error
What are the 4 ENHANCING qualitative characteristics?
- Comparability
- Verifiability
- Timeliness
- Understandability
What do we have to we wary of in terms of cost when preparing financial statements?
Cost constraint- the value of information being prepared should be worth more than the cost to prepare the statements
What is a key assumption in the conceptual framework?
The going concern, underlies the preparation of financial statements
What do the elements of the financial statements define?
The main terms used in the financial statements and the measurement bases describe how to measure and report the elements of financial statements.
What are the 5 elements of financial statements?
- Assets
- Liabilities
- Equity
- Income
- Expense
What are the 2 measurements of elements?
- Historical cost
- Fair value
