PROBLEM 1: TRUE OR FALSE All changes in an entity’s economic resources and claims to those resources result from the entity’s financial performance. The qualitative characteristics of useful information apply only to the financial information provided in the financial statements According to IFRS® Practice Statement 2 Making Materiality Judgments, the cost is an important consideration when making materiality judgments
PROBLEM 1: TRUE OR FALSE
- All changes in an entity’s economic resources and claims to those resources result from the entity’s financial performance.
- The qualitative characteristics of useful information apply only to the financial information provided in the financial statements
- According to IFRS® Practice Statement 2 Making Materiality Judgments, the cost is an important consideration when making materiality judgments
- When making materiality judgments, a quantitative assessment alone is not always sufficient to conclude that an item of information is not material
- Materiality judgments apply only to items that are recognized - but not to those that are unrecognized
- The more significant the qualitative factors are, the lower the quantitative thresholds will be. Thus, an item with a zero amount can be material in light of qualitative thresholds.
- When making materiality judgments, an entity should judge an item’s materiality only on its own and not in combination with other information in the complete set of financial statements
- The Conceptual Framework and the Standards specify a uniform quantitative threshold for materiality
- To meet the objectives of general-purpose financial reporting, a Standard sometimes contains requirements that depart from the Conceptual Framework
- The Conceptual Framework is concerned with the provision of financial information to both external users and internal users
PROBLEM 2: TRUE OR FALSE
- The Conceptual Framework may be revised from time to time. Revisions in the Conceptual Framework automatically result to changes in the Standards
- According to the revised Conceptual Framework, the asset is the right, while the liability is the obligation, rather than the ultimate inflows or outflows of economic benefits resulting from the asset or liability
- Legal enforceability of a right, for example, ownership, is necessary for control over an economic resource to exist
- According to the revised Conceptual Framework, an asset can exist even if the probability that it will provide inflows of future economic benefits is low, and even if the asset is subject to a high measurement uncertainty
- According to the revised Conceptual Framework, what the entity controls are the right and not the ultimate inflows of future economic benefits that the economic resource may produce.
- The Conceptual Framework defines income and expenses in terms of changes in assets and liabilities
- Not all items that meet the definition of a financial statement element are recognized; they are recognized only if recognizing them will also result in relevant and faithfully represented information
- Measuring an asset at historical cost will always result in the same carrying amount of the asset from period to period.
- According to the Conceptual Framework, amortized _ cost measurement relates to historical cost, rather than the current value
- Although the use of a single measurement basis improves the understandability of the financial statements, this may not always lead to useful information. Thus; the Standards require different measurement bases for different assets, liabilities, income, and expenses
PROBLEM 3: MULTIPLE CHOICE
- According to the Conceptual Framework, these are the. qualitative characteristics that make information useful to users
a. Fundamental
b. Enhancing
c. Relevance
d. Comparability
2. Information that is capable of making a difference in the decisions made by users has this qualitative characteristic.
a. Relevance
b. Faithful representation
c. Timeliness
d. Verifiability
3. When making materiality judgments, the overriding consideration is
a. the ability of the item being judged to influence users’ decisions
b. the size of the impact of the item being judged
c. the characteristics of the item being judged.
d. c and d
4. This qualitative characteristic is unique in the sense that it necessarily requires at least two items
a. Verifiability
b. Faithful representation
c. Timeliness
d. Comparability
5. Which of the following enhances the comparability of information?
a. Making, unlike things, look alike
b. Making like things look different
c. Using different methods to account for similar transactions from period to period.
d. Consistent application of accounting policies from period to period
6. Information has this qualitative characteristic if different, knowledgeable, and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation.
a. Relevance
b. Faithful representation
c. Verifiability
d. Comparability
7. The Conceptual Framework uses the term “claims” against the reporting entity to refer to
a. Expenses
b. Liabilities
c. Equity
d. both b and c
8. Entity A is assessing whether an item meets the definition of a financial statement element. Entity A considers the transaction’s substance and economic reality rather than merely its legal form. Entity A is applying. which of the following accounting concepts?
a. Substance over form
b. Form over substance
c. Accrual
d. Verifiability
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