CONCEPTUAL FRAMEWORK FOR FINANCIAL

CHAPTER 2

CONCEPTUAL FRAMEWORK FOR FINANCIAL

REPORTING

IFRS questions are available at the end of this chapter.

TRUE-FALSE—Conceptual Answer No. Description T 1. Nature of conceptual framework.T 2. Conceptual framework definition.F 3. Levels of conceptual framework.T 4 International conceptual framework.F 5. Statements of Financial Accounting Concepts.T 6. Objective of financial reporting.F 7. Financial statement users.T 8. Relevance and faithful representation.T 9. Consistency.F 10. Relevance.F 11. Faithful representation.F 12. Basic elements.T 13. Comprehensive income.T 14. Going concern assumption.F 15. Economic entity assumption.F 16. Expense recognition principle.T 17. Recognizable revenues.T 18. Supplementary information.F 19. Cost benefit trade-off.F 20. Conservatism.

MULTIPLE CHOICE—Conceptual Answer No. Description c 21. GAAP defined.d 22. Purpose of conceptual framework.c 23. Conceptual framework.d 24. Conceptual framework purpose.d S

• Conceptual framework benefits.

d 26. Objectives of financial reporting.a 27. Decision usefulness.d 28. General purpose of financial reporting.a 29. Primary objective of financial reporting.a P

• Example of comparability.

a S

• Primary quality of relevance.

b 32. Characteristic of accounting information.c 33. Characteristic of accounting information.c 34. Meaning of comparability.a 35. Meaning of consistency.Intermediate Accounting 2014 FASB Update 15th Edition Kieso Test Bank Visit TestBankDeal.com to get complete for all chapters

Test Bank for Intermediate Accounting, Fifteenth Edition

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MULTIPLE CHOICE—Conceptual (cont.) Answer No. Description d 36. Ingredient of relevance.c 37. Ingredient of reliability.a 38. Consistency characteristic.b 39. Primary quality of accounting information.d 40. Quality of relevance.a 41. Quality of reliability.d 42. Consistency quality.a 43. Decision-usefulness criterion.c 44. Primary qualities of accounting information.b 45. Definition of relevance.b 46. Definition of reliability.d 47. Relevance quality.c 48. Materiality characteristic.d 49. Completeness characteristic.b 50. Neutrality characteristic.d 51. Neutrality characteristic.c 52. Definition of verifiability.a 53. Quality of predictive value.c 54. Quality of free from error.d 55. Consistency.b 56. Consistency characteristic.b 57. Comparability and consistency.d 58. Comparability.d 59. Elements of financial statements.c 60. Distinction between revenues and gains.c 61. Definition of a loss.d 62. Definition of comprehensive income.b 63. Components of comprehensive income.d P

• Comprehensive income.

b S

• Earnings vs. comprehensive income.

a S

• Reporting financial statement elements.

b 67 Basic element of financial statements.a 68. Basic element of financial statements.d 69. Basic element of financial statements.c 70. Definition of gains.d 71. Historical cost assumption.c 72. Periodicity assumption.b 73 Going concern assumption.b 74. Periodicity assumption.a S

• Monetary unit assumption.

c S

• Periodicity assumption.

c 77. Monetary unit assumption.d 78. Economic entity assumption.a 79. Economic entity assumption.b 80. Periodicity assumption.a 81. Going concern assumption.d 82. Going concern assumption.d 83. Implications of going concern assumption.a 84. Historical cost principle.

Conceptual Framework Underlying Financial Accounting

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MULTIPLE CHOICE—Conceptual (cont.) Answer No. Description d 85. Historical cost principle.c 86. Revenue recognition principle.d 87. Revenue recognition principle.d 88. Revenue recognition principle.d 89. Measurement principle.c 90. Expense recognition principle.b 91. Product costs.b 92. Expense recognition principle.b 93. Expense recognition principle.b 94. Expense recognition.c 95. Full-disclosure principle.a 96. Argument against historical cost.d 97. Recognition of revenue.b 98. Revenue recognition principle.c 99. Definition of performance obligation.a 100. Required components of financial statements.d 101. Recognition of expenses.c 102. Historical cost principle.a 103. Expense recognition principle example.d 104. Recording expenditure as asset.c 105. Historical cost principle violation.a 106. Full disclosure principle violation.d 107. Full disclosure principle.c 108. Historical cost principle violation.a 109. Industry practice constraint.c 110. Costs of providing financial information.d 111. Benefits of providing financial information.c 112. Use of materiality.b 113. Definition of prudence/conservation.a 114. Example of materiality constraint.d 115. Constraints to limit the cost of reporting.a 116. Cost-benefit relationship.c 117. Materiality characteristic.d 118. Materiality.d 119. Pervasive constraints.a 120. Prudence or conservatism.b 121. Conceptual framework second level a 122. Trade-offs between characteristics of accounting information.c 123. Trade-offs between characteristics of accounting information.c P

• Prudence or conservatism.

Test Bank for Intermediate Accounting, Fifteenth Edition

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MULTIPLE CHOICE—CPA Adapted Answer No. Description a 125. Quality of predictive value.b 126. Relevance and faithful representation.b 127. Classification of gains and losses.b 128. Earnings concept.a 129. Components of comprehensive income.b 130. Components of comprehensive income.d 131. Components of comprehensive income.d 132. Components of comprehensive income.a 133. Definition of recognition.

P

Note: these questions also appear in the Problem-Solving Survival Guide.

S

Note: these questions also appear in the Study Guide.

BRIEF EXERCISES

Item Description BE2-134 Qualitative characteristics.BE2-135 Accounting concepts—identification.BE2-136 Accounting concepts—identification.

EXERCISES

Item Description E2-137 Accounting concepts—matching.E2-138 Accounting concepts—fill in the blanks.E2-139 Basic assumptions.E2-140 Historical cost principle.E2-141 Matching concept.

CHAPTER LEARNING OBJECTIVES

• Describe the usefulness of a conceptual framework.

• Describe the FASB’s efforts to construct a conceptual framework.

• Understand the objective of financial reporting.

• Identify the qualitative characteristics of accounting information.

• Define the basic elements of financial statements.

• Describe the basic assumptions of accounting.

• Explain the application of the basic principles of accounting.

• Describe the impact that the cost constraint has on reporting accounting information.