1. Identify the applicable qualitative characteristics referred to in the Conceptual Framework for Financial Reporting that is not adhered in the scenario below and indicate the respective group to which each characteristic belongs to. You are also required to indicate the sub-category (if applicable) to which the qualitative characteristic belong to.Director’s bonuses are based on profits, and they therefore make it their goal to make profits seem as high as possible. They understate expenses by recognising the minimum amount of expenses and they overstate profits by recognising the maximum profits. The information cannot be relied on as the directors select and filter the information to influence decisions.a.Faithful Representation; neutral; Fundamentalb.Relevance; Fundamentalc.Faithful Representation; free from error; Fundamentald.Faithful Representation; completeness; Fundamental2.

The following facts pertain to the question: Director's Bonuses are used to calculate profits.…

Answered: 1. Identify the applicable qualitative…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. Identify the applicable qualitative characteristics referred to in the Conceptual Framework for Financial Reporting that is not adhered in the scenario below and indicate the respective group to which each characteristic belongs to. You are also required to indicate the sub-category (if applicable) to which the qualitative characteristic belong to.

Director’s bonuses are based on profits, and they therefore make it their goal to make profits seem as high as possible. They understate expenses by recognising the minimum amount of expenses and they overstate profits by recognising the maximum profits. The information cannot be relied on as the directors select and filter the information to influence decisions.

Faithful Representation; neutral; Fundamental

Relevance; Fundamental

Faithful Representation; free from error; Fundamental

Faithful Representation; completeness; Fundamental

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The following facts pertain to the question:

Director's Bonuses are used to calculate profits.
Their major objective is to appear to be making high profits.
They overestimate the profit they can gain from seeing large profits while underestimating the expense of seeing a modest amount of profit.

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