Conceptual Framework for Financial Reporting

Historical cost and Current value

To provide a consistent set of principles and concepts for developing and applying accounting standards.

<p>A reporting entity is any entity required or chooses to prepare financial statements. A consolidated entity is a group that comprises a parent company and its subsidiaries, presenting their financial statements as a single economic unit.</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Prudence requires that assets and income are not overstated, and liabilities and expenses are not understated. Neutrality mandates that financial information is free from bias and is presented objectively.</p> Signup and view all the answers

<p>It acknowledges that producing financial reports is costly and time-consuming. The Board must weigh the benefits of reporting certain information against the cost of providing that information.</p> Signup and view all the answers

<p>Assets, liabilities, equity, income, and expenses.</p> Signup and view all the answers

<p>To provide useful information to current and potential investors, lenders, and other creditors to aid in decision-making regarding providing resources to the entity.</p> Signup and view all the answers

<p>The characteristics of the asset or liability, and how it contributes to future cash flows.</p> Signup and view all the answers

<p>It categorizes fair value measurements into three levels based on the reliability of the inputs used.</p> Signup and view all the answers

Set of principles that underlie financial reporting.

To provide information for investors to assess an entity's resources.

Attributes that make financial information useful: relevance and faithful representation.

Information that influences decision-making.

Accurate depiction of economic substances of transactions.

Attributes that improve the usefulness of financial information: comparability, timeliness, verifiability, understandability.

Ability to compare financial information across periods and entities.

The importance of providing information promptly.

Users can confirm the representation of information is accurate.

Clear and concise presentation of information.

Balancing benefits of information against its costs.

Reports providing information on an entity’s financial position.

Assumption that an entity will continue to operate in the future.

Entity preparing financial statements due to laws or choice.

Financial statements of multiple entities prepared together.

Statements for a parent company and its subsidiaries as one entity.

Assets, liabilities, equity, income, and expenses.

Including elements in financial statements when they meet definitions.

Removing an asset or liability from the financial statements.

How elements are quantified in financial statements.

Value of an asset based on its original purchase price.

Value reflecting assets at their current market price.

The price received to sell an asset in an orderly transaction.

Reporting relevant information adequately while ensuring comparability.

Grouping similar items for presenting financial information.

Combining two dissimilar financial items into one.

Increases in assets or decreases in liabilities that raise equity.

Decreases in assets or increases in liabilities that lower equity.