conceptual framework
____________ establishes the concepts that underlie financial reporting
1. identifying the boundaries of financial reporting
2. selecting the transactions, events, and circumstances to be represented
3. how they should be recognized and measured
4. how they should be summarized and reported
The conceptual framework provides guidance on:
standards and rules
practical problems
NEED for conceptual framework: to develop a coherent set of _____ and ______. To solve new and emerging __________
nature, function, limits
A conceptual framework underlying financial accounting is important because it can lead to consistent standards and it prescribes the ______, ______, and _______ of financial accounting and financial statements
FASB; 7
The _____ has issued _____ Statements of Financial Accounting Concepts (SFAC) for business enterprises
Basic Objective
First Level
Qualitative Characteristics and Elements
Second Level
Recognition, Measurement, and Disclosure Concepts
Third Level
Objective
Objective of Financial Reporting: provide financial information about the reporting entity that is _____ to present and potential equity investors, lenders, and other creditors in making decisions about providing resources to the entity
D
According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on?
a. GAAP
b. reporting on management's stewardship
c. the need for conservatism
d. the needs of the users of the information
Concepts Statement No. 2
outlines the qualitative characteristics of accounting information
FASB; qualitative characteristics
The _____ identified the _______ of accounting information that distinguish BETTER (more useful) information from inferior (less useful) information for decision making purposes
economic entity
company keeps its activity separate from its owners and other businesses (only report transactions for the co)
Going concern
company to last long enough to fulfill objectives and commitments (report at historical cost if assume co will be there in the future)
Monetary Unit
money is the common denominator
Periodicity
company can divide its economic activities into time periods (quarters and years)
Measurement Principle
the most commonly used measurements are based on historical cost and fair value
historical cost
provides a reliable benchmark for measuring historical trends (how much paid to acquire asset)
fair value AKA market value
information may be more useful
financial assets and financial liabilities
Recently the FASB has taken the step of giving companies the option to use fair value as the basis for measurement of _________ and ________
fair value
reporting of ________ information is increasing
revenue recognition
generally occurs when (1) realized or realizable and (2) when earned
expense recognition (matching principle)
let the expense follow the revenues
full disclosure
providing information that is of sufficient importance to influence the judgment and decisions of an informed user
Financial Statements, Notes to the financial statements, and supplementary information
Provide Full Disclosure through ...
Cost Constraint (benefit > cost)
cost of providing information must be weighed against the benefits that can be derived from using it
Industry Practice
the peculiar nature of some industries and business concerns sometimes requires departure from basic accounting theory
D. Recognition
According to the conceptual framework, the process of reporting an item in the financial statements of an entity is
A. Allocation
B. Matching
C. Realization
D. Recognition
A. timeliness over faithful representation
Conceptually, interim financial statements can be described as emphasizing
A. timeliness over faithful representation
B. Faithful representation over relevance
C. Relevance over comparability
D. Comparability over neutrality
B
According to the conceptual framework, the usefulness of providing information in financial statements is subject to the constraint of
a. consistency
b. cost benefit
c. relevance
d. representational faithfulness
C
What is the conceptual framework intended to establish?
A. GAAP in financial reporting by business enterprises
B. the meaning of "present fairly in accordance with GAAP
C. the objectives and concepts for use in developing standards of financial accounting
D
When a parent subsidiary relationship exists, consolidated financial statements are prepared in recognition of the accounting concept of
a. reliability
b. materiality
c. legal entity
d. economic entity
Relevance
According to the FASB conceptual framework, predictive value is an ingredient of....
Concepts Statement No. 6
defines ten interrelated elements that relate to measuring the performance and financial status of a business enterprise
assets, liabilities, equity
Moment in Time
investment by owners, distribution to owners, Comprehensive income, rev, exp, gains, losses
Period of Time
Statement of Financial Accounting Concepts No. 5
The FASB sets forth most of these concepts in its _________________, "Recognition and Measurement in Financial Statements of Business Enterprises
conceptual framework
____________ establishes the concepts that underlie financial reporting
1. identifying the boundaries of financial reporting
2. selecting the transactions, events, and circumstances to be represented
3. how they should be recognized and measured
4. how they should be summarized and reported
The conceptual framework provides guidance on:
standards and rules
practical problems
NEED for conceptual framework: to develop a coherent set of _____ and ______. To solve new and emerging __________
nature, function, limits
A conceptual framework underlying financial accounting is important because it can lead to consistent standards and it prescribes the ______, ______, and _______ of financial accounting and financial statements
FASB; 7
The _____ has issued _____ Statements of Financial Accounting Concepts (SFAC) for business enterprises
Basic Objective
First Level
Qualitative Characteristics and Elements
Second Level
Recognition, Measurement, and Disclosure Concepts
Third Level
Objective
Objective of Financial Reporting: provide financial information about the reporting entity that is _____ to present and potential equity investors, lenders, and other creditors in making decisions about providing resources to the entity
D
According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on?
a. GAAP
b. reporting on management's stewardship
c. the need for conservatism
d. the needs of the users of the information
Concepts Statement No. 2
outlines the qualitative characteristics of accounting information
FASB; qualitative characteristics
The _____ identified the _______ of accounting information that distinguish BETTER (more useful) information from inferior (less useful) information for decision making purposes
economic entity
company keeps its activity separate from its owners and other businesses (only report transactions for the co)
Going concern
company to last long enough to fulfill objectives and commitments (report at historical cost if assume co will be there in the future)
Monetary Unit
money is the common denominator
Periodicity
company can divide its economic activities into time periods (quarters and years)
Measurement Principle
the most commonly used measurements are based on historical cost and fair value
historical cost
provides a reliable benchmark for measuring historical trends (how much paid to acquire asset)
fair value AKA market value
information may be more useful
financial assets and financial liabilities
Recently the FASB has taken the step of giving companies the option to use fair value as the basis for measurement of _________ and ________
fair value
reporting of ________ information is increasing
revenue recognition
generally occurs when (1) realized or realizable and (2) when earned
expense recognition (matching principle)
let the expense follow the revenues
full disclosure
providing information that is of sufficient importance to influence the judgment and decisions of an informed user
Financial Statements, Notes to the financial statements, and supplementary information
Provide Full Disclosure through ...
Cost Constraint (benefit > cost)
cost of providing information must be weighed against the benefits that can be derived from using it
Industry Practice
the peculiar nature of some industries and business concerns sometimes requires departure from basic accounting theory
D. Recognition
According to the conceptual framework, the process of reporting an item in the financial statements of an entity is
A. Allocation
B. Matching
C. Realization
D. Recognition
A. timeliness over faithful representation
Conceptually, interim financial statements can be described as emphasizing
A. timeliness over faithful representation
B. Faithful representation over relevance
C. Relevance over comparability
D. Comparability over neutrality
B
According to the conceptual framework, the usefulness of providing information in financial statements is subject to the constraint of
a. consistency
b. cost benefit
c. relevance
d. representational faithfulness
C
What is the conceptual framework intended to establish?
A. GAAP in financial reporting by business enterprises
B. the meaning of "present fairly in accordance with GAAP
C. the objectives and concepts for use in developing standards of financial accounting
D
When a parent subsidiary relationship exists, consolidated financial statements are prepared in recognition of the accounting concept of
a. reliability
b. materiality
c. legal entity
d. economic entity
Relevance
According to the FASB conceptual framework, predictive value is an ingredient of....
Concepts Statement No. 6
defines ten interrelated elements that relate to measuring the performance and financial status of a business enterprise
assets, liabilities, equity
Moment in Time
investment by owners, distribution to owners, Comprehensive income, rev, exp, gains, losses
Period of Time
Statement of Financial Accounting Concepts No. 5
The FASB sets forth most of these concepts in its _________________, "Recognition and Measurement in Financial Statements of Business Enterprises