Exam 2: Financial Reporting: Its Conceptual Framework

The FASB and IASB have joined forces to develop a joint Conceptual Framework. The joint task force's objective is to provide a sound foundation for both boards to develop accounting standards. This framework is essential to fulfilling the board's goal. What is the goal?

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

Liquidity is positively related to financial flexibility but negatively related to risk and return on investments.

The materiality of an item of financial information refers to the likelihood that its omission or misstatement would affect the decisions of those relying on that information and thus make differing choices if the information had been presented. This concept most closely relates to the

What types of information would be helpful in accessing the amounts, timing, and uncertainty of future cash flows?

Which of the following sets includes only accounting assumptions and conventions?

A constraint mentioned by GAAP on qualitative characteristics is

A list of statements follows: a.__________on__________provides a measure of overall company performance. b._______________is the uncertainty or umpredictability 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.

Understandability is a characteristic that is

Define the following terms as they relate to decision usefulness, the ultimate objective of accounting information. a.Relevance b.Predictive value c.Confirmatory value d.Materiality

The rules for accounting are based upon concepts, and principles which broad and subject to an interpretation.

List the eight phases of the Joint FASB and IASB Conceptual Framework Project. 1___________________ 2___________________ 3___________________ 4___________________ 5___________________ 6___________________ 7___________________ 8___________________

Below is a list of accounting assumptions, conventions, and principles. Following the list is a series of descriptive statements. Required: Match each item in the list with its descriptive statement by placing the appropriate letter(s) in the space provided.

Which qualitative characteristic is an ingredient of relevance?

Which one of the following assumptions or principles most logically supports the preparation of a single set of consolidated financial statements that combines the financial information of several wholly owned but separately identifiable businesses?

The eight phases of the joint FASB and IASB framework project are: 1) objective and qualitative characteristics, 2) elements and recognition, 3) presentation and disclosure, 4) reporting entity, 5) measurement, 6) framework for GAAP hierarchy, 7) applicability to the not-for-profit sector, and 8) any remaining issues needing to be addressed.

Intracompany comparability would be violated if

Long Corporation has adopted the policy of charging to expense at the time of purchase all assets having a cost of less than $200, regardless of the life expectancy of the asset. This policy is most closely related to the

The IASB and FASB boards have agreed that the objective of general purpose financial reporting is to provide

Financial statements elements arranged in basic financial statements provide limited information for external users to ascertain the necessary information in which to base decisions upon. What are some other ways companies can disclose financial information to external users?