Chapter 1

Question 1

Qualitative characteristics (2)

Answer 1

1. relevance
2. representational faithfulness

Question 2

Materiality

Answer 2

= how important a piece of info is or the impact on the company’s overall operations (goes hand in hand with relevance)

Question 3

1. Relevance

Answer 3

• predictive and feedback value

Question 4

2. represententional faithfulness

Answer 4

• complete
• neutral and
• free from error or bias

Question 5

Enhancing qualitative characteristics (4)

Answer 5

1. Verifiability
2. Understandability
3. Timeliness
4. Comparability ( consistency)

Question 6

matching principle - revenue is deffered

Answer 6

matching principle = expenses should be recognized in the same period that the revenue they helped generate is recognized

=> revenue deferred = expenses deferred

Question 7

First level of conceptual framework

Answer 7

OBJECTIVES

• provide information:
  1. useful in invenstment and credit decision
  2. useful in making resource allocation decisions including assessing management stewardship

Question 8

3rd level - ‘how’ implementation

Answer 8

Foundational principles:

• control
• econimic entity
• fair value
• full disclosure
• going concern
• historical cost
• matching
• monetary unit
• periodicity