Exam 2: The Conceptual Framework of Accounting and Its Relevance to Financ

SAC 2 (Objectives of General Purpose Financial Reporting)requires that general-purpose financial reports disclose information that is:

Identify the appropriate qualitative characteristic employed in the following information provided. Predictive value is a primary quality of this information. This information is free from material error and bias. Companies in the same industry employ the same accounting principles.

The IASB and US FASB are jointly developing a common conceptual framework because this is necessary for the Convergence Project which aims to converge two sets of accounting standards.

What guidelines are available in AASB 1031 "Materiality" to assist in determining the materiality of an item? A)If the amount is equal or greater than 10% of the appropriate base amount,the item is material. B)If the amount is equal or greater than 10% of the appropriate base amount,the item is immaterial. C)If the amount is equal or less than 5% of the appropriate base amount,the item is material D)If the amount is equal or less than 5% of the appropriate base amount,the item is immaterial. E)If the amount is equal or greater than 10% of the appropriate base amount,the item is material; if the amount is equal or less than 5% of the appropriate base amount,the item is immaterial.

Which of the following is/are characteristics of "comparability"?

Which of the following statements most accurately reflects the qualitative characteristics of financial information in the Conceptual Framework?

Identify which qualitative characteristic of financial reports is best described in each item below: The financial reports of Curl Curl Ltd are audited by a chartered accountant. Curl Curl Ltd and Bondi Ltd both use fair value accounting to recognise financial instruments. Curl Curl Ltd authorises issue of its financial reports prior to the shareholders' meeting.

The audit of Liverpool Ltd had been completed and the audit senior for the engagement prepared items for discussion.He argues that the following list of accounting changes violate the consistency qualitative characteristic of accounting information.As audit manager,which of the following items do you think are worthy of discussion with the audit partner? 1.After five years of using straight-line depreciation for reporting purposes and accelerated depreciation for tax purposes,the entity decided to adopt accelerated depreciation for reporting purposes. 2.The company uses an inventory valuation method that is different from the method used by other companies in the industry. 3.The estimated remaining useful life of an asset was reduced due to the increase in volume of use of the asset. 4.The company disposed of a subsidiary that had been included in the financial reports in prior years. 5.The company wrote off equipment due to obsolescence.

The Blaxland Ltd filed a lawsuit against D-Mart Machineries for failure to comply with the specifications of the factory equipment that they ordered and received.The solicitors for Blaxland Ltd strongly believe that the company will receive $50,000 to $100,000 if they win the case.Which action is consistent with the Framework?

Social accountability is considered in the Framework as part of the objectives of general-purpose financial reports.

A central goal in establishing a conceptual framework of accounting will be to obtain general consensus on:

Which of the following accounting policies is an example of a trade-off between relevance and reliability?

Which of the following factors should be considered in order to determine whether an entity is a reporting entity when it is not obvious that users exist who would be dependent on the financial reports of the entity.

Jackson Ltd is developing computer software for use in its courier delivery service business.So far the company had spent $50,000 but the software is still unfinished and not expected to be finished in time for the preparation of the reports.As a result,the company had to purchase a computer package amounting to $100 000 to finalise its accounts.There is no further use for the unfinished software as it is expected that the package could be used by the entity for another ten years.Which accounting treatment would be consistent with the Framework?

Which of the following Statement of Accounting Concepts are still operational in Australia?

The objective of financial statements is to provide future oriented information to help investors make business decisions:

The efficiency perspective is consistent with limiting accounting policy choices in the interest of consistency and comparability.

The Framework outlines two underlying assumptions of financial statements.These arE.

The IASB and US FASB are jointly developing a common conceptual framework to guide both standard setters in developing separate standards for their constituents.

In accordance with AASB framework which of the following transaction(s)is/are consistent with a definition of income?