Regulation

Question 1

What is the conceptual framework?

Answer 1

A set of concepts helping guide the preparation of financial statements.

It helps create new standards.

If there is no standard in place the principles should be used.

Question 2

qualitative characteristics of financial statements.

Answer 2

Two fundamental characteristics.
Relevance- Can help Users of ST. Is it affected by materiality.

Faithful representation- Relates to being objective and having no errors.

It needs both of these

Other 4 enhancing characteristics

verifiability- can it be proven

Timeliness- Are they up to date and does it allow time to make a decision.

Understandability- should be easily understandable for those with reasonable knowledge.

Comparability- Should be consistency and disclosure of different policies such as depreciation.

Question 3

What is the materiality concept?

Answer 3

Omissions/ items are material if they would influence the economic decisions of users of financial statements.

Question 4

Going concern?

Answer 4

The assumption a business will continue operation for the future.
This is important otherwise the accounts will have to be valued at liquidation.

When a business is not a going concern, the first step is to trasnfer NCA to CA

Question 5

According to the conceptual framework for financial reporting, what helps users of statements identify a business strength and weaknesses?

Answer 5

The assets controlled and a companies obligations (liabilities)

Question 6

IAS 1 objectives

Answer 6

Provide financial information to users to allow them to make economic decisions.

Show the result of management stewardship of resources e.g how well they use assets, manage liabilities, make decisions and protect shareholder value

Assist users to predict future cash flows

Question 7

What characteristics are required to be a faithful representation?

Answer 7

complete, free from error, neutral