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Chapter 1 Conceptual framework
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- 1What are fundamental qualitative charactersitics of financial information?Relevance
and
faithful representation - 2Describe relevance of information: First pointit is capable of making a difference in the decisions made by the capital providers.
- 3Describe relevance of information: what is predictive value?1. Predictive value – if it has value as an input to predictive processes used by investors to form their own expectations about the future.
- 4Deccribe relevance of information: what is confirmatory value?2. Confirmatory value – relevant information helps users confirm or correct prior expectations.
- 5Describe relevance of information: point 3?it is capable of making a difference, whether the users use it or not.
- 6What does materiality of infomration mean?Materiality is relative matter. Information is material if omitting it or misstating it could influence decisions that users make on the basis of the reported financial information.
- 7What is faithrul representation?Faithful representation is attained when the depiction of an economic phenomenon is complete, neutral, and free from material error.
- 8What does completeness of information mean?It means that all information that is necessary for faithful representation is provided.
- 9What does neutrality mean?Neutrality is the absence of bias intended to attain a predetermined result.
- 10What are enhancing qualitative characteristics?comparability,
verifiability,
timeliness,
understandability - 11Explain comparability.• Comparability – enables users to identify the real similarities and differences in economic events between companies
- 12Explain verifiability.• Verifiability – occurs when independent measurers, using the same methods, obtain similar results
- 13Explain timeliness.• Timeliness – means having information available to decision makers before it loses its capacity to influence decisions
- 14Explain understandability.• Understandability – the quality of information that lets reasonably informed users see its significance. Understandability is enhanced when information is classified, characterized and presented clearly and concisely.
- 15Explain going conern assumption.FS are prepared under the assumption that the entity will continue to operate for the foreseeable future.
- 16How assets are defined in conceptual framework?A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.
- 17How liabilities are defined?A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
- 18Define the equity.The residual interest in the assets of the entity after deducting all its liabilities.
- 19Explain income.Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.
- 20Explain expenses.Decreases economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
- 21When should asset be recognised?When it is probable that the future economic benefits will flow to the entity and asset has the cost or other cost or other value that can be measured reliably.
- 22When should liability be recognised?A liability is recognised in the statement of financial position when it is probable that an outflow of resources embodying economic benefits will result from settling the present obligation and the amount at which the settlement will take place can be measured reliably.
- 23When should income be recognised?Income is recognised in the statement of profit or loss and other comprehensive income when an increase in future economic benefits relating to an increase in an asset or a decrease in a liability can be measured reliably.
- 24Whrn should expenses be recognised?Expenses are recognised in the statement of profit or loss and other comprehensive income when a decrease in future economic benefits related to a decrease in an asset or an increase in a liability can be measured reliably
- 25Explain historical cost measurement.an asset is recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire it at its acquisition date. Liabilities are recorded at the amount of the proceeds received in exchange for an obligation, or at the amount of cash to be paid out in order to satisfy the liability in the normal course of business.
- 26Explain realisable value.the realisable value is the amount of cash or cash equivalents that could be obtained currently by selling the asset in an orderly disposal, or in the normal course of business. The settle amount of a liability is the amount of cash and cash equivalents expected to be paid to satisfy the obligation in the normal course of business.
- 27Explain present value. the present value of an asset means the discounted future net cash inflows or net cash savings that are expected to arise in the normal course of business. The present value of a liability is the discounted future net cash outflows that are expected to settle the obligation in the normal course of business.
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- Financial accounting: IFRS application Fichas sobre Chapter 1 Conceptual framework, creado por Archimed Nemes el 23/12/2017.
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