Chat with AIExam 7: The Fasbs Conceptual Framework
The most important new issue brought up in the discussion memorandum that preceded the conceptual framework was predictive ability.
(41) 
VerifiedFalse
Explain the hierarchy of accounting qualities identified in SFAC No. 2.
(35) VerifiedDecision makers are at the top of the hierarchy. The specific qualitative characteristics of accounting come under the general heading of decision usefulness, continuing the emphasis on decision makers and their needs. The two primary, decision-specific qualities are relevance and reliability. Comparability is a secondary qualitative characteristic. Relevance is defined as being capable of making a difference in a decision by helping users to form predictions about the outcomes of past, present, and future events or to confirm or correct expectations. Relevance has two main aspects-predictive value and feedback value-and one minor one, timeliness. Predictive value refers to usefulness of inputs for predictions while feedback value concerns confirming or correcting the expectations of decision-makers. Timeliness is really a constraint on both of the other aspects of relevance. To be relevant, information must be timely, which means that it must be "available to decision makers before it loses its capacity to influence decisions."
Reliability is composed of three components: verifiability, representational faithfulness, and neutrality. Verifiability refers to the degree of consensus among measurers. Representational faithfulness refers to the idea that the measurement itself should correspond with the phenomenon it is attempting to measure. Neutrality refers to the belief that the policy-setting process should be primarily concerned with relevance and reliability rather than the effect a standard or rule might have on a specific user group or the enterprise itself.
These qualities are applied within the constraints of benefits greater than cost and materiality. Materiality addresses whether an item is large enough to influence users' decisions.
The eight (8) statements making up the conceptual framework establish generally accepted accounting principles.
(24) VerifiedFalse
Relevance and reliability are the primary characteristics that standard setters should be concerned with.
(24) The definitions of SFAC No. 6 are virtually identical to those in SFAC No. 3 except that they are extended to nonbusiness organizations.
(32) Define the elements of financial statements identified in SFAC No. 3 and SFAC No. 6.
(34) Which of the following is a value judgment found in SFAC No. 1?
(43) Competitive disadvantage is an indirect cost of published information.
(38) The conceptual framework maintains that accounting reports should become the only relevant source of information about enterprises.
(36) Under SFAC No. 8, which of the following are aspects of relevance?
(38) SFAC No. 1 takes the position that users of financial statements must be assumed to be knowledgeable about financial information and reporting.
(34) The benefits of accounting information pertain to how useful the accounting information is relative to the capital maintenance and accountability objectives.
(40) Which of the following is a pervasive constraint under the "original" qualitative characteristics of accounting, pre-SFAC No. 8? It is an entity-specific constraint post SFAC No. 8.
(36) "Economic consequences" is not part of the conceptual framework.
(28) Which component of the conceptual framework is perhaps the most difficult to apply in practice?
(33) The discussion memorandum that preceded the conceptual framework was perhaps the most extensive ever published by the FASB.
(27) With regard to users, SFAC No. 1 established that financial statements should be aimed at a common core of similar information users.
(32) The qualitative characteristics of accounting information detailed in the conceptual framework proceeded directly from which of the following documents?
(26) 
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