The conceptual framework indicates the desired fundamental and enhancing qualitative characteristics of accounting information. Several constraints impede achieving these desired characteristics. Answer each of the following questions related to these characteristics and constraints. 1. Which component would allow a large company to record the purchase of a $120 printer as an expense rather than capitalizing the printer as an asset? 2. Donald Kirk, former chairman of the FASB, once noted that "... there must be public confidence that the standard-setting system is credible, that selection of board members is based on merit and not the influence of special interests..." Which characteristic is implicit in Mr. Kirk's statement? 4. National Bancorp, a publicly traded company, files quarterly and annual financial statements with the SEC. Which characteristic is relevant to the timing of these periodic filings? 3. Allied Appliances, Incorporated, changed its revenue recognition policies. Consistency Which characteristic is jeopardized by this change? 5. In general, relevant information possesses which qualities? 6. When there is agreement between a measure or description and the phenomenon it purports to represent, information possesses which characteristic? 7. Jeff Brown is evaluating two companies for future investment potential. Jeff's task is made easier because both companies use the same accounting methods when preparing their financial statements. Which characteristic does the information Jeff will be using possess? Materiality 8. A company should disclose information only if the perceived benefits of the disclosure exceed the costs of providing the information. Which constraint does this statement describe? Neutrality Timeliness Predictive value and/or confirmatory value Faithful representation Comparability Cost effectiveness
The conceptual framework indicates the desired fundamental and enhancing qualitative characteristics of accounting information. Several constraints impede achieving these desired characteristics. Answer each of the following questions related to these characteristics and constraints. 1. Which component would allow a large company to record the purchase of a $120 printer as an expense rather than capitalizing the printer as an asset? 2. Donald Kirk, former chairman of the FASB, once noted that "... there must be public confidence that the standard-setting system is credible, that selection of board members is based on merit and not the influence of special interests..." Which characteristic is implicit in Mr. Kirk's statement? 4. National Bancorp, a publicly traded company, files quarterly and annual financial statements with the SEC. Which characteristic is relevant to the timing of these periodic filings? 3. Allied Appliances, Incorporated, changed its revenue recognition policies. Consistency Which characteristic is jeopardized by this change? 5. In general, relevant information possesses which qualities? 6. When there is agreement between a measure or description and the phenomenon it purports to represent, information possesses which characteristic? 7. Jeff Brown is evaluating two companies for future investment potential. Jeff's task is made easier because both companies use the same accounting methods when preparing their financial statements. Which characteristic does the information Jeff will be using possess? Materiality 8. A company should disclose information only if the perceived benefits of the disclosure exceed the costs of providing the information. Which constraint does this statement describe? Neutrality Timeliness Predictive value and/or confirmatory value Faithful representation Comparability Cost effectiveness
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Comparability
Consistency
Cost effectiveness
Faithful representation
Materiality
Show Transcribed Text
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Faithful representation
Materiality
Neutrality
Predictive value and/or confirmatory value
Timeliness
Transcribed Image Text:The conceptual framework indicates the desired fundamental and enhancing qualitative characteristics of accounting information.
Several constraints impede achieving these desired characteristics. Answer each of the following questions related to these
characteristics and constraints.
1. Which component would allow a large company to record the purchase of
a $120 printer as an expense rather than capitalizing the printer as an
asset?
2. Donald Kirk, former chairman of the FASB, once noted that "... there
must be public confidence that the standard-setting system is credible, that
selection of board members is based on merit and not the influence of
special interests..." Which characteristic is implicit in Mr. Kirk's statement?
3. Allied Appliances, Incorporated, changed its revenue recognition policies.
Which characteristic is jeopardized by this change?
4. National Bancorp, a publicly traded company, files quarterly and annual
financial statements with the SEC. Which characteristic is relevant to the
timing of these periodic filings?
5. In general, relevant information possesses which qualities?
6. When there is agreement between a measure or description and the
phenomenon it purports to represent, information possesses which
characteristic?
7. Jeff Brown is evaluating two companies for future investment potential.
Jeff's task is made easier because both companies use the same
accounting methods when preparing their financial statements. Which
characteristic does the information Jeff will be using possess?
8. A company should disclose information only if the perceived benefits of
the disclosure exceed the costs of providing the information. Which
constraint does this statement describe?
Materiality
Neutrality
Consistency
Timeliness
Predictive value and/or confirmatory value
Faithful representation
Comparability
Cost effectiveness
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