Exam 2: Conceptual Framework Underlying Financial Reporting

Financial engineering Explain the practice of financial engineering and how it relates to fraudulent financial reporting.

Which of the following best describes why a conceptual framework is necessary?

Gains are defined as

Application of the full disclosure principle

Matching concept A concept is a group of related ideas. Matching could be considered a concept because it includes ideas related to both revenue recognition and expense recognition. Briefly explain the theory behind a) revenue recognition and b) expense recognition.

Valuing assets at their liquidation values rather than their cost is inconsistent with the

Accounting terminology - fill in the blanks Fill in the blanks below with the accounting term(s) that best completes each sentence. 1. A soundly developed conceptual framework is a ______ set of standards and rules. ______ and ______ are the fundamental qualitative characteristics that make accounting information useful for decision making. 2. Enhancing qualitative characteristics are ______, ______, ______ and ______. 3. Liabilities have three essential characteristics: 1. They reprecent a_________,2. the entity has a_______________,and 3.______________ 4. While consolidated financial statements are prepared from the perspective of the ______, taxes are paid from the perspective of the ______. 5. Collectibility is one of the three conditions of the revenue recognition principle. Assuming the other two conditions are met, revenue should only be recognized if collectibility is ______. 6. The ______ stipulates that anything that is relevant to decisions should be included in the financial statements. 7. A company's Management Discussion and Analysis (MD&A) is an example of ______. 8. A ______- based approach, as used in Canadian GAAP and IFRS, is sometimes criticized for being too ______. 9. Under the ______ principle, ______ incurred during a particular period are matched with ______ earned during that same period. 10. The ______ is based on the assumption that a business enterprise will continue to operate for the foreseeable future. 11. One of the assumptions of the ______ is valuation at a particular point in time. 12. ______ is defined as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." 13. Standard setters have given companies the option to use ______ instead of historical costs.

The overriding criterion by which accounting information can be judged is that of

Representational faithfulness includes

The assumption that a business enterprise will NOT be sold or liquidated in the near future is known as the

Market-based measure versus entity-specific measure Fair value is a market-based measure, as opposed to an entity-specific measure. Explain the difference between an entity-specific value and a market-based value.

Materiality refers to

Current value measurement bases Identify three current value measurement bases in the IFRS conceptual framework.

Financial reporting pressures caused by budgets Explain why budgets might exert negative influence into accounting decisions. Offer some examples to illustrate where this might be the case.

Which basic assumption may NOT be followed when a firm in bankruptcy reports financial results?

Under ASPE, where there is a significant uncertainty with respect to the measurement of an item,

Timeliness is increased by

Which of the following serves as the justification for the periodic recording of depreciation expense?

Which of the following statements regarding liabilities is true?

You want to improve the qualitative characteristics of your firm's financial statements. Which of the following options would most likely improve the timeliness of your company's financial statements?