Exam 2: Financial Reporting: Its Conceptual Framework

At lunch recently, two accountants were discussing the merits of the FASB's conceptual framework project, which resulted in the publication of seven Statements of Financial Accounting Concepts and required more than ten years of effort. One accountant thought the effort was a waste of resources, since accounting was unlike physics, chemistry, and biology, where natural laws apply. The other accountant thought the effort was very valuable. He stated that "accounting, like any other discipline, benefits from having a coherent theory." Required: Write a brief essay that discusses the advantages that are derived from the existence of a conceptual framework for financial accounting and reporting.

Management discussion and analysis would be included in the supplementary information to the financial statements.

Which of the following items would most likely be a violation of the materiality constraint?

The FASB's Conceptual Framework was established as a foundation for many interrelated objectives, concepts, principles and definitions. The following is a series of descriptive statements. Required: Match each objective with the appropriate statement by placing the appropriate letter in the space provided.

The FASB and IASB describe four characteristics that enhance the decision usefulness of information that is relevant and faithfully represented. What are these characteristics and provide a brief explanation of each.

A list of statements follows: a._______are applications of______ and_____ to differing types of transactions. b._________are specific implementation procedures. c._________and______are broad and definitional d.The ac counting projects for the conceptual framework project for financial accounting and reporting define the accounting______ how they should be______ and______ Required: Fill in the words necessary to complete the statements.

List 5 of the important accounting assumptions that have had an impact on the development of GAAP and Accounting.