FARE 1 framework

Question 1

Qualitative characteristics of useful financial information.

Answer 1

1. Fundamental Qualitative Char.

2. Enhancing Qualitative Char.

Question 2

Fundamental Qualitative Characteristics

Answer 2

1. Relevance

2. Faithful representation

Question 3

Relevance

Answer 3

a. Predictive value
b. Confirming value
c. Materiality

Question 4

Faithful representation

Answer 4

a. Completeness
b. Neutrality
c. Freedom from error

Question 5

Enhancing Qualitative Characteristics

Answer 5

a. Comparability
b. Verifiability
c. Timeliness
d. Understandability

Question 6

Full set of financial statements

Answer 6

1. Statement of financial position
2. Statement of earnings
3. Statement of comprehensive income
4. Statement of cash flows
5. Statement of changes in owners’ equity

Question 7

Fundamental recognition criteria

Answer 7

1. Definitions
2. Measurability
3. Relevance
4. Reliability

Question 8

Measurement attributes for assets and liabilities

Answer 8

1. Historical cost (PP&E)
2. Current cost (Inventory)
3. Net realizable value (AR)
4. Current market value (Marketable sec)
5. Present value of future cash flows (Bonds)

Question 9

Fundamental assumptions

Answer 9

1. Entity assumption (corporation)
2. Going concern assumption (will continue)
3. Monetary unit assumption (money)
4. Periodicity assumption (years, quarters)
5. Historical cost principle (based on cost)
6. Revenue recognition principle - earned and realized (paid for) or realizable (accrued)
7. Matching principle
8. Accrual accounting
9. Full disclosure principle
10. Conservatism principle