Conceptual Framework (Objective of Financial Reporting) PDF

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Problem 2-1 (IFRS) Which statement is true about the Conceptual Framework for Financial Reporting? a. The Conceptual Framework is not a Standard. b. The Conceptual Framework describes theconcepts for general purpose financial reporting. c. In case of conflict, the requirements of theIFRS prevail ove...

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Page |1 Problem 2-1 (IFRS) 1. Which statement is true about the Conceptual Framework for Financial Reporting? a. The Conceptual Framework is not a Standard. b. The Conceptual Framework describes the concepts for general purpose financial reporting. c. In case of conflict, the requirements of the IFRS prevail over the Conceptual Framework. d. All of these statements are true about the Conceptual Framework. 2. Which is a purpose of the Conceptual Framework? a. To assist the IASB to develop IFRS based on consistent concepts. b. To assist preparers to develop consistent accounting policy when no Standard applies to a particular transaction or when Standard allows a choice of accounting policy. c. To assist all parties to understand and interpret the Standards. d. All of these can be considered a purpose of the Conceptual Framework. 3. Which is not a purpose of the Conceptual Framework? a. To assist users of financial statements in interpreting the Standards. b. To assist preparers of financial statements in applying the Standards. c. To assist preparers of financial statements in developing an accounting policy when a Standard allows an accounting policy choice. d. To assist the BOA in promulgating rules and regulations affecting the accountancy profession. 4. The Conceptual Framework provides the foundation for Standards that a. Contribute to transparency by enhancing international comparability and quality of financial information. b. Strengthen accountability of the people entrusted with the economic resources of the entity. c. Contribute to economic efficiency by helping investors to identify opportunities and risks across the world. d. All of these are the result of Standards developed based on consistent concepts. Problem 2-2 (IFRS) 1. What is the authoritative status of the Conceptual Framework? a. The Conceptual Framework has the highest level of authority. b. In the absence of a standard or an interpretation that specifically applies to a transaction, the Conceptual Framework shall

c. In the absence of a Standard or an interpretation that specifically applies to a transaction, management shall consider the applicability of the Conceptual Framework in developing and applying an accounting policy that results in an information that is relevant and faithfully represented. d. The Conceptual Framework applies only when the IASB develops new standards. 2. The Conceptual Framework is intended to establish a. GAAP in financial reporting. b. The meaning of “present fairly in accordance with GAAP”. c. The objectives and concepts for use in developing standards of financial accounting and reporting. d. The hierarchy of sources of GAAP. 3. A Conceptual Framework should a. Lead to uniformity of financial statements. b. Eliminate alternative accounting principles. c. Guide multinational entities in developing generally accepted auditing standards. d. Define the basic objectives, terms and concepts of accounting. 4. Which is not a purpose of the Conceptual Framework? a. To provide definitions of key terms and fundamental concepts. b. To provide specific guidelines for resolving situations not covered by existing accounting standards. c. To assist accountants in selecting among alternative accounting and reporting methods. d. To assist the IASB in the standard-setting process. Problem 2-3 (IAA) 1. In the Conceptual Framework for Financial Reporting, what provides the “why” of accounting? a. Measurement and recognition concept b. Qualitative characteristic of accounting information c. Element of financial statement d. Objective of financial reporting 2. The underlying theme of the Conceptual Framework is a. Decision usefulness b. Understandability c. Timeliness d. Comparability 3. Which is not a purpose of having a Conceptual Framework? a. To enable the profession to solve emerging practical problems more quickly.

be followed.

b. To provide a foundation from which to build more useful standards.

Page |2 c. To enable the standard-setting body to issue more useful and consistent pronouncements over time. d. To assist regulatory agencies in issuing rules and regulations for a particular industry. 4. Which of the following is not a benefit associated with the Conceptual Framework? a. A Conceptual Framework should increase users’ understanding and confidence in financial reporting. b. Practical problems should be more quickly solvable. c. A coherent set of accounting standards should result. d. Business entities will need far less assistance from accountants. 5. Which statement is not true concerning the Conceptual Framework? a. The Conceptual Framework should be a basis for standard setting. b. The Conceptual Framework should allow practical problems to be solved more quickly. c. The Conceptual Framework should be based on fundamental truth derived from the law of nature. d. The Conceptual Framework should increase users’ understanding and confidence in financial reporting. Problem 2-4 (ACP) 1. Users of financial reports include which of the following? a. Creditors b. Creditors and government agencies c. Creditors and unions d. Creditors, government agencies and unions 2. The primary users of financial information include a. Existing and potential investors b. Existing and potential lenders and other creditors c. User group such as employees, customers, governments and their agencies, and the public d. Existing and potential investors, lenders and other creditors 3. Which group is not among the externa users from whom financial statements are prepared? a. Customers b. Suppliers c. Employees d. All of these are external users of financial statements. 4. Which of the following is an internal user of financial information? a. Board of Directors b. Shareholder

d. Creditor with Long-Term Contract 5. These users require information on risk and return provided by their investment. a. Investors b. Employees c. Lenders d. Customers 6. These users are interested in information about the profitability and stability of the entity in order to assess the ability of the entity to provide remuneration, retirement benefits and employment opportunities. a. Customers b. The Public c. Government and their Agencies d. Employees 7. These users are interested in information that enables them to assess whether their loans, the related interest thereon, and other amounts owing to them will be paid when due. a. Lenders and other Creditors b. Borrowers c. Trade Creditors d. Owners 8. These users are interested in information about the continuance of an entity, especially when they have a long-term involvement with or are dependent on the entity. a. Customers b. Employees c. Trade Unions d. Suppliers 9. These users are interested in information in order to regulate the activities of an entity, determine taxation polices and provide a basis for national statistics. a. Governments and their Agencies b. Major Organization of Users c. Bureau of Internal Revenue d. Department of Finance 10. These users need information on trends and recent developments where an entity makes a substantial contribution to the local economy providing employment and using local suppliers. a. The Public b. Governments and their Agencies c. Finance Entities d. Private Entities Problem 2-5 (IAA) 1. The overall objective of financial reporting is to provide information a. That is useful in decision making. b. About assets, liabilities, and equity of an entity.

c. Holder of Bonds

c. About financial performance during a period....