The conceptual frameworks qualitative characteristic of faithful representation includes
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58. The conceptual framework's qualitative characteristic of faithful representation includes:A.Predictive value.B.Neutrality.C.Confirmatory value.D.Timeliness. Show AACSB: Reflective thinkingBloom's: KnowledgeLearning Objective: 01-05 Explain the purpose of the FASB's conceptual framework.Level of Learning: Easy1-49 We have textbook solutions for you! The document you are viewing contains questions related to this textbook. College Accounting, Chapters 1-27 Heintz/Parry Expert Verified Chapter 01 - Environment and Theoretical Structure of Financial Accounting59. The conceptual framework's recognition and measurement concepts recognize which ofthe following as an assumption, rather than a principle? Get answer to your question and much more AACSB: Reflective thinkingBloom's: KnowledgeLearning Objective: 01-07 Describe the four basic assumptions underlying GAAP.Level of Learning: Easy60. The conceptual framework's recognition and measurement concepts recognize which ofthe following as a principle, rather than an assumption? Get answer to your question and much more AACSB: Reflective thinkingBloom's: KnowledgeLearning Objective: 01-08 Describe the four broad accounting principles that guide accounting practice.Level of Learning: Easy61. Phase A of the new conceptual framework focuses on: Get answer to your question and much more AACSB: Reflective thinkingBloom's: KnowledgeLearning Objective: 01-05 Explain the purpose of the FASB's conceptual framework.Level of Learning: Easy1-50 Chapter 01 - Environment and Theoretical Structure of Financial Accounting62. The primary objective of financial accounting information is to provide useful informationto:A.Management.B.Capital providers.C.Regulators.D.None of the above.AACSB: Reflective thinkingBloom's: ComprehensionLearning Objective: 01-06 Identify the objective of financial reporting; the qualitative characteristics of financial reporting information;and the elements of financial statements.Level of Learning: Medium63.SFAC No.5focuses on:A.Objectives of financial reporting.B.Qualitative characteristics of accounting information.C.Recognition and measurement concepts in accounting.D.Elements of financial statements.AACSB: Reflective thinkingBloom's: KnowledgeLearning Objective: 01-05 Explain the purpose of the FASB's conceptual framework.Level of Learning: Medium64. The main issue in the debate over accounting for employee stock options was:A.Which employees should receive options.B.The amount of compensation expense that a company should recognize.C.How many options should be granted to key executives.D.The tax consequences of employee stock options.AACSB: Reflective thinkingBloom's: ComprehensionLearning Objective: 01-05 Explain the purpose of the FASB's conceptual framework.Level of Learning: Medium1-51 Chapter 01 - Environment and Theoretical Structure of Financial Accounting65. Net income equals:A.Assets minus liabilities. Upload your study docs or become a Course Hero member to access this document Upload your study docs or become a Course Hero member to access this document Qualitative characteristics are the attributes that make financial information useful to users. For Analytical purposes, Qualitative characteristics can be differentiated into Fundamental and Enhancing qualitative characteristics. FUNDAMENTAL QUALITATIVE CHARACTERISTICS Fundamental Characteristics distinguish useful financial reporting information from that is not useful or misleading. The two fundamental Qualitative characteristics are :
Relevance: In accounting, the term relevance means it will make a difference to a decision maker. Relevant information is capable of making a difference in the decisions made by users. It is capable of making a difference in decisions if it has predictive value, confirmatory value , or both. Predictive value helps users in predicting or anticipating future outcomes. Confirmatory value enables users to check and confirm earlier predictions or evaluations. For example, in the decision to replace an equipment that has been used for the past six years, the original cost of the equipment does not have relevance. In other words, the original cost is irrelevant or is not relevant in the decision to replace the equipment. What will have relevance are the future amounts, such as the cost of the new equipment, and the savings that will occur when the old equipment is replaced. Here's another expression of relevance: Costs that will differ among alternatives. Costs that will not differ among alternatives do not have relevance. In order to have relevance, accounting information must be timely. Financial statements issued three weeks after the accounting period ends will have more relevance than financial statements issued several months after the period ends. Having timeliness and relevance may mean sacrificing some precision or reliability. The Relevance of information is affected by its nature and its materiality. Materiality : Information is material if omitting it, or misstating it could influence decisions that users make on the basis of financial information about a specific reporting entity. Materiality is an aspect of relevance which is entity-specific. It means that what is material to one entity may not be material to another. It is relative. Information is material if it is significant enough to influence the decision of users. Materiality is affected by the nature and magnitude (or size) of the item. Faithful Representation is the second Fundamental Qualitative Characteristic. Faithful Representation The Financial reports represent economic phenomena in words and numbers. The financial information in the financial reports should represent what it purports to represent. Meaning, it should show what really are present (Example: Position of Assets and Liabilities) and what really happened (Example: Position of Income and expenditure), as the case may be. There are three characteristics of faithful representation: 1. Completeness: Depiction of all necessary information for a user to understand the phenomenon being depicted. It includes all necessary descriptions and explanations (adequate or full disclosure of all necessary information), 2. Neutrality: Depiction is without bias in the selection or presentation of Financial information uust not be manipulated in any way in order to influence the decision of users. (fairness and freedom from bias), We often refer to a term called True and Fair View in Accounting. 3. Free from error: means there are no errors and inaccuracies in the description of the phenomenon and no errors made in the process by which the financial information was produced. (no inaccuracies and omissions). That does not mean no inaccuracies can arise, particularly in case of making estimates. The standards expect that the estimates are made on a realistic basis and not arbitrarily. ENHANCING QUALITATIVE CHARACTERISTICS Enhancing Qualitative Characteristics distinguish more useful information from less useful information. The Enhancing Qualitative Characteristics are divided into 4 attributes.
COMPARABILITY Comparability is the Qualitative characteristic that enables users to identify and understand similarities in and differences among items. Information about a reporting entity is more useful if it can be compared with similar information about other entities and with similar information about other entities and with similar information about the same entity for another period or date. Comparable information enables comparisons within the entity and across entities. When comparisons are made within the entity, information is compared from one accounting period to another. For example: income is compared for the years 2014, 2015, and 2016. Comparability of information across entities enables analysis of similarities and differences between different companies. Corresponding information for preceding periods should be shown to enable comparison over time. Consistency vs. Comparability Consistency is not the same as Comparability. Consistency refers to the use of the same methods for the same items (Consistency of Treatment) either from period to period within a reporting entity or in a single period across entities. Users must be able to distinguish between different accounting policies in order to be able to make a valid comparison of similar items in the accounts of different entities. VERIFIABILITY A company's accounting results are verifiable when they're reproducible, so that, given the same data and assumptions, an independent accountant can produce the same result the company did. Verifiability helps assure that Information faithfully represents the economic phenomena it purports to represent. It means that different knowledgeable and observers could reach consensus that a particular depiction is a Faithful Representation. Verifiability isn't about determining whether the assumptions a company makes are correct. Rather, it's about determining whether the accounting result the company reaches is appropriate for the data, given the assumptions that have been made. The Financial Accounting Standards Board, which writes the rules for the U.S. accounting profession, says that verifiability provides assurance that "accounting measures represent what they purport to represent." It's not enough for a company to say the answer is "2." It also has to show you the "1 + 1" on the other side of the equation. Verifiability. Verifiability has its own limitations too.
TIMELINESS The timeliness of accounting information refers to the provision of information to users quickly enough for them to take action. Information becomes obsolete and useless if it is not reported within time. Usually the Statute specifies the time for preparation and presentation of Financial reports. UNDERSTANDABILITY Classifying, Characterising presenting information clearly and concisely makes it Understandable. A principle which states that a company's financial information should be presented in such a way that a person with a reasonable knowledge of business and finance, and the willingness to study the information, should be able to comprehend it. This principle is included in the Accounting Standards Board's Statement of Principles. by Shyam Sunder Kasturi Source : ACCA Study Material What are the characteristics of faithful representation?To be a perfectly faithful representation, a depiction would have three characteristics. It would be complete, neutral and free from error.
What are the 4 qualitative characteristics?The four enhancing qualitative characteristics are comparability, verifiability, timeliness and understandability. The characteristic of relevance implies that the information should have predictive and confirmatory value for users in making and evaluating economic decisions.
What are the 3 main elements of the conceptual frame?Requirements of the conceptual framework attempt to ensure the information in the financial reports are useful. Therefore, they include reliability, relevance, and sufficiency.
What is faithful representation in conceptual framework?Faithful representation means representation of the substance of an economic phenomenon instead of representation of its legal form only. [ 2.12] A faithful representation seeks to maximise the underlying characteristics of completeness, neutrality and freedom from error. [
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