Question 1

A key political benefit that may arise from a conceptual framework in accounting is:

Accepted Answer

A conceptual framework provides a clear and objective basis for setting accounting standards, thereby reducing the likelihood of political interference. This enhances the credibility and integrity of the accounting profession, which may ultimately result in greater public trust and confidence in financial reporting. However, options B and C are not necessarily benefits but rather consequences that may arise from the existence of a conceptual framework. Option D is incorrect because not all of the choices are benefits.

Question 2

In regards to The Conceptual Framework for Financial Reporting,which of the following is incorrect:

Accepted Answer

The Conceptual Framework for Financial Reporting was issued by the IASB and the FASB jointly in 2010.

Question 3

How does the Conceptual Framework differ from an accounting standard?

Accepted Answer

The principles in the Conceptual Framework are general concepts that guide the development of accounting standards, while accounting standards provide specific requirements for a particular area of financial reporting. Accounting standards are developed based on the principles in the Conceptual Framework, but they provide more specific guidance for financial reporting.

Question 4

The IASB distinguishes between two types of prudence: I.Cautious prudence
II)Non-cautious prudence
III)Symmetric prudence
IV)Asymmetric prudence

Accepted Answer

The IASB distinguishes between cautious prudence and asymmetric prudence. Cautious prudence involves being conservative in estimates under uncertainty, while asymmetric prudence refers to recognizing losses more readily than gains.

Question 5

Which of the below responses is incorrect. An understanding of the application of the concepts in the Conceptual Framework is required to:

Accepted Answer

The Conceptual Framework does not require the selection of an exact basis of measurement. Instead, it provides guidance for selecting an appropriate basis of measurement based on relevance and faithful representation.

Question 6

Accounting standards are seen to be political because:

Accepted Answer

Accounting standards can have social, economic, and political implications. They shape perceptions of organizations by providing a financial picture of a company. They can create wealth transfers between various groups in society by impacting how profits and losses are distributed. And they can have a competitive effect by affecting the way companies function and are able to operate. As a result, accounting standards are often the subject of political debate and negotiation as various groups seek to influence their development and implementation.

Question 7

Prudence is defined in the Proposed Framework as:

Accepted Answer

Prudence is the exercise of caution when making judgements under conditions of uncertainty.

Question 8

The Conceptual Framework:

Accepted Answer

The Conceptual Framework was a joint project between the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) to develop a common understanding of accounting and financial reporting.

Question 9

The effective application of the concepts in the Conceptual Framework requires a:

Accepted Answer

The effective application of the concepts in the Conceptual Framework requires a systematic approach, which means applying the framework in a methodical and organized manner to ensure that all relevant concepts are taken into account and applied consistently. A systematic approach also helps to ensure that the financial statements are reliable, relevant, and comparable.

Question 10

The IPSASB has issued a conceptual framework applicable for:

Accepted Answer

The IPSASB conceptual framework is applicable for public sector entities.

Question 11

Conceptual frameworks issued by the IASB apply only to:

Accepted Answer

The IASB conceptual frameworks are designed for for-profit entities, and they do not cover non-profit or public sector entities.

Question 12

Which of the following questions does the Conceptual Framework NOT answer?

Accepted Answer

The Conceptual Framework provides guidance on the principles and concepts that underlie financial reporting. It answers questions related to the objective of financial reporting, the qualitative characteristics of information, and the elements of financial statements. However, it does not prescribe an exact measurement basis to be used in financial reports. The measurement basis can vary depending on the nature of the transactions and events being reported.

Question 13

Which of the following statements is correct in relation to the assumptions to be made when preparing financial reports?

Accepted Answer

The underlying assumption for preparing financial reports is that they are prepared on a going concern basis, which means the organization will continue to operate in the foreseeable future. While there are other assumptions related to accrual accounting and consistency, the going concern assumption is the most fundamental. Option B is incorrect, as while the Conceptual Framework does outline several principles, they are overarching concepts rather than specific assumptions. Option C is incorrect, as several assumptions underpin financial reporting. Option D is incorrect, as more information is not always better than less, and can sometimes be overwhelming or misleading.

Question 14

Which of these is not a criticism of Conceptual Framework and Proposed Framework projects?

Accepted Answer

The criticism that the measurement of the elements of financial reporting is too highly specified is not a common criticism of Conceptual Framework and Proposed Framework projects. Typically, these frameworks are criticized for being too descriptive, ambiguous, and for potential conflicts between faithful representation and relevance, rather than for being overly specific in their measurement guidelines.

Question 15

It is argued that the Conceptual Framework is descriptive,not prescriptive,because:

Accepted Answer

The Conceptual Framework is descriptive in nature as it describes the existing accounting principles and practice. It does not provide any prescriptive guidance or instructions. However, it can also be used to improve practice by providing a framework of concepts that can be applied to specific accounting issues.

Question 16

The accounting conceptual framework is what kind of theory?

Accepted Answer

The accounting conceptual framework is a normative theory, meaning it provides a set of recommendations or guidelines for how accounting should be done. It is not a positive theory, which seeks to describe and explain how accounting is actually done in practice. While it is abstract in nature, that is not its primary classification. It is also not an emergent theory, which develops based on observations and data analysis.

Question 17

Faithful representation has been criticised because:

Accepted Answer

Faithful representation assumes that there is one objective and true value for accounting transactions, which does not reflect the inherent uncertainty and subjectivity that exists in accounting. Therefore, it has been criticised for not providing a full and accurate representation of the financial situation of an entity.

Quiz 2: The Conceptual Framework for Financial Reporting