Chapter 1
CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING
Discussion Question 17
1. Understandability
2.
3.
4.
Faithful representation, neutrality
Faithful representation, completeness
Completeness, relevance, comparability
5.
6.
7.
Faithful representation, verifiability
Faithful representation, completeness
Understandability
8. Relevance, timeliness
Discussion Question 18
1.
2.
3.
4.
Correct
Incorrect, no particular presentation requirements are discussed in the Framework.
Correct
Incorrect, understandability is not an excuse to omit complex information in the financial statements. Users are expected to possess basic business knowledge and to exercise diligence.
5.
6.
7.
8.
Correct
Correct
Incorrect, expenses do not involve transactions with owners.
Incorrect, an entity shall not leave its accounting policy unchanged if management assesses that another method of accounting will more relevantly and reliably present enterprise performance and financial position.
9. Incorrect, understandability depends on two factors: the quality of the information and the characteristics of the users.
10. Incorrect, an information loses its relevance if it is not communicated early enough for decision making needs of the users.
11. Correct
12. Incorrect, there is no standard form for the presentation of financial statements; the management prepares the financial statements using form that will best communicate to users the enterprise’s financial position, performance and other changes in financial position.
13. Incorrect, the main objective of consistency is to present actual similarities and differences between reporting periods and between enterprises, and not to smooth profit.
2.
3.
4.
5.
6.
7.
14. Incorrect, the financial capital concept does not limit the measurement basis of financial statement elements to only one type.
15. Correct
Discussion Question 19
1. Fair value (current cost)
Present value
Historical cost and net realizable value
Historical cost and current cost
Historical cost and current cost
Current cost
Current cost
8.
9.
Present value
Historical cost and current cost
10. Historical cost and net realizable value
11. Present value
12. Present value
13. Combination of historical cost, current cost, present value and realizable value
14. Historical cost
15. Present value
1
MC1 B
MC2 C
MC3 C
MC4 B
MC5 D
MC6 C
MC7 A
MC8 B
MC9 C
MC10 A
MC11 B
MC12 C
MC13 A
MC14 C
MC15 C
MC16 A
MC17 D
MC18 D
MC19 C
MC20 A
Multiple Choice Questions
MC21 B
MC22 B
MC23 A
MC24 C
MC25 C
MC26 B
MC27 A
MC28 A
MC29 A
MC30 B
MC31 C
MC32 A
MC33 C
MC34 B
MC35 A
MC36 D
MC37 D
MC38 D
MC39 B
MC40 B
MC41 A
MC42 B
MC43 C
MC44 B
MC45 B
MC46 D
MC47 C
MC48 D
2