Question 1

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.

Accepted Answer

The statement is true. The IASB and US FASB are indeed jointly developing a common conceptual framework as part of their Convergence Project, which seeks to bring together two sets of accounting standards.

Question 2

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

Accepted Answer

The objective of financial statements is to provide past oriented information about the financial performance and position of an entity, not future-oriented information. This information is useful for making investment, credit, and other business decisions based on past performance and trends.

Question 3

For the preparation and presentation of financial statements,Europe adopts the IASB Conceptual Framework.

Accepted Answer

False

Question 4

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

Accepted Answer

The answer of The efficiency perspective is consistent with limiting...

Question 5

One of the benefits of the Conceptual Framework is that it provides parameters for the exercise of judgement in resolving accounting issues.

Accepted Answer

The Conceptual Framework provides a foundation for developing accounting standards, principles and guidelines, which help to provide parameters for the exercise of judgement in resolving accounting issues. These standards can help to ensure consistency and comparability in financial reporting, and can also help to reduce the risk of fraud and misrepresentation. In addition, the Framework can serve as a guide for preparers, auditors and users of financial statements in assessing the quality of financial reporting.

Question 6

The Conceptual Framework defines principles for a specific accounting recognition,measurement and disclosure matter.

Accepted Answer

The Conceptual Framework provides general principles and guidelines for financial reporting, but it does not define principles for specific accounting recognition, measurement, and disclosure matters.

Question 7

The IASB Conceptual Framework is considered to be an International Accounting Standards Board (IASB)standard.

Accepted Answer

The IASB Conceptual Framework is not a standard; it provides the underlying principles and concepts for the development of accounting standards.

Question 8

The IASB Conceptual Framework serves as a guide to the UK Accounting Standards Board (ASB)in developing accounting standards.

Accepted Answer

The IASB Conceptual Framework serves as a guide to the ASB in developing accounting standards.

Question 9

The UK Accounting Standards Board (ASB)retained the use of its own conceptual framework even after harmonisation.

Accepted Answer

The ASB retained the use of its own conceptual framework even after the UK implemented harmonised accounting standards through the adoption of IFRS.

Question 10

Relevance and faithfully represented characteristics are placed as overriding qualities of financial statements over other qualitative characteristics

Accepted Answer

According to the conceptual framework for financial reporting, relevance and faithfully represented characteristics are considered as the primary qualitative characteristics of financial statements that override other qualitative characteristics such as understandability, comparability, and timeliness.

Question 11

Transactions or events that cannot be linked to a 'cost' or a 'market price' are not recognised.

Accepted Answer

This statement is true. In accounting, only transactions and events that can be linked to a cost or market price are recognized and recorded. This is because the cost or market price serves as the basis for determining the financial value of the transaction or event. Examples of transactions that cannot be linked to a cost or market price include non-monetary transactions, emotional experiences, and non-identifiable activities.

Question 12

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

Accepted Answer

The answer of The IASB and US FASB are jointly...

Question 13

The trade-off between relevance and faithful representation requires exercise of judgment constrained by timeliness and costs versus benefits.

Accepted Answer

The statement accurately describes the trade-off between relevance and faithful representation and the constraints that influence the exercise of judgment in financial reporting.

Question 14

The recognition criteria for liabilities are consistent with those for assets.

Accepted Answer

The recognition criteria for liabilities are consistent with those for assets, both require that it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.

Question 15

The IASB Conceptual Framework has the force of law.

Accepted Answer

The IASB Conceptual Framework is not a standard and does not have the force of law. It is a document that provides a foundation for the development of accounting standards and assists in their interpretation. It is meant to serve as a guide rather than a mandatory requirement for financial reporting.

Question 16

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

Accepted Answer

Social accountability is not considered in the Conceptual Framework as part of the objectives of general purpose financial reports. The main objectives of general purpose financial reports according to the Conceptual Framework are to provide information that is useful in making economic decisions, to provide information about a reporting entity's resources, claims against the entity, and changes in resources and claims, and to provide information that helps assess management's stewardship.

Question 17

Prudence is exercised in the preparation and presentation of financial statements when asset values are never shown in excess of their realisable values but could be understated,and liabilities are never to be understated.

Accepted Answer

The answer of Prudence is exercised in the preparation and...

Question 18

The Conceptual Framework suggests that the relevance characteristic outweighs the faithfully represented characteristic if the financial statement is to be rendered useful.

Accepted Answer

The Conceptual Framework for Financial Reporting states that both relevance and faithful representation are equally important for financial information to be useful. Neither characteristic outweighs the other.

Question 19

A separate recognition criteria for equity is not set forth in the Conceptual Framework because it represents a residual interest in the assets of an entity.

Accepted Answer

The statement is true. Equity is a residual interest that exists after liabilities are subtracted from assets, and therefore does not require a separate recognition criteria in the Conceptual Framework.

Question 20

When an IASB standard conflicts with the Conceptual Framework,the former prevails.

Accepted Answer

According to the IASB Framework for the Preparation and Presentation of Financial Statements, in case of any conflict between the standards and the Framework, the standard prevails. The standards are meant to provide specific guidance for accounting treatment of transactions, whereas the Framework provides general principles for financial reporting. Therefore, in case of any conflict, the specific guidance provided by the standard takes precedence over the general principles in the Framework.

Quiz 2: The Conceptual Framework of Accounting and Its Relevance to Financial Reporting