Exam 2: Financial Reporting: Its Conceptual Framework

The primary purpose of financial reporting is to provide useful and relevant information to the internal stakeholder's of the company.

Understandability is a characteristic that is

Which of the following statements is not true with regard to the benefits derived from the FASB's conceptual framework of accounting?

List five of the important accounting assumptions that have had an impact on the development of generally accepted accounting principles.

In order to be relevant, accounting information should have

The primary objective if financial reporting is to provide information that is useful to external decision makers. The following is a list of types of information that are helpful in assessing expected future cash flows and statements describing those types of information.. a. Liquidity b. Operating capability c. Risk d. Return on investment e. Financial Flexibility ______ 1. The uncertainty of the future profitability of a company ______ 2. The ability of a company to use its financial resources to adapt to change. ______ 3. The ability of a company to efficiently produce goods and services for customers. ______ 4. Refers to how quickly a company can convert assets into cash. ______ 5. A measure of overall company performance for equity shareholders. ______ 6. Comes from a company's ability to raise new capital. ______ 7. Caused by factors such as technological, political, and economic change. ______ 8. Indicated by the productive capacity of long-lived assets. ______ 9. Negatively related to risk. Required: Match each type of information with the appropriate statement by placing the appropriate letter in the space provided.

Oil and gas reserves information would be included within the financial statements.

Which fundamental characteristic is an ingredient of faithful representation?

All of the following items are classified as accounting assumptions and conventions except for

According to the FASB hierarchy of fundamental qualitative characteristics, the two primary qualities making accounting information useful are

Using the straight-line method to amortize patents is an application of expense recognition using

The city of Anchorage sold land for its appraised value to the Big Bear Oil Company on June 1, 2014, that originally cost the city $950,000. On June 1, 2014, the land was appraised at a value of $1,400,000, and on December 31, 2014, the land's value was estimated to be $1,450,000. On Big Bear Oil Company's balance sheet at December 31, 2014, the land should be valued at

A company that uses accounting methods in preparing its tax returns that differ from the accounting methods used to prepare its financial statements is

A list of statements follows: a. _______________on_____ provides a measure of overall company performance for equity shareholders.. b.______ is the uncertainty or unpredictability of the future results of a company. c. is the ability of a company to take_____effective actions to change the amounts and timing of cash flows. d. _____is the term used to describe how quickly a company can convert its assets into cash to pay a liability. e. refers to the ability of a company to____maintain a given physical level of operations. Required: Fill in the words necessary to complete the statements.

The Conceptual Framework includes two "fundamental qualitative characteristics" that must be present for financial reporting information to be useful. Required: List and describe the two fundamental characteristics of usefulness.

Discuss the purpose of the Conceptual Framework.

Similar to the constraints in the FASB's qualitative characteristics, the joint IASB/FASB boards have identified which constraint