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Flashcards

Conceptual Framework,

Lindsey Williams REG English 38 cards

Cards in this deck (38)

  1. 1Conceptual Framework and Standard Setting ProcessDesigned to allow accounting professionals and self regulating accounting bodies a means of "reasoning" to consider a previously unencountered or novel event or transaction, within a common, existing structure or framework
  2. 2Objective of Financial ReportingTo provide information about the entity that is useful to present and potential debt and equity lenders or investors, based on the needs of users or stakeholders
  3. 3Qualitative CharacteristicsInvolve both Fundamental and Enhancing Qualities
  4. 4ElementsDefinitions (assets, liabilities, equity, etc)
  5. 5Primary Objective of Qualitative CharacteristicsUnderstandability and Decision Usefulness
  6. 6Fundamental Qualities IncludeRelevance and Faithful Representation
  7. 7Components of Fundamental Qualities: RelevancePredictive Value, Confirmatory Value, and Materiality
  8. 8Components of Fundamental Qualities: Faithful RepresentationCompleteness, Neutrality, Free from Error
  9. 9Enhancing QualitiesComparability, Varifiability, Timeliness, Understandability
  10. 10Enhancing Qualities: RelevanceComparability and Verifiability
  11. 11Enhancing Qualities: Faithful RepresentationTimeliness and Understandability
  12. 12ConstraintCost Effectiveness: Benefit > Cost
  13. 13Fundamental Quality: Relevance SuggestsAccounting information has the potential to make a difference in the decision making process
  14. 14For Information to be relevant it must have:(1) Predictive or (2) confirmatory (feedback) value (3) material
  15. 15Predictive and Confirmatory ValueInterrelated and can help inform future decisions this year and improve processes next year
  16. 16MaterialityAlways company specific and requires professional judgement. It is based on the retaliative size of the company
  17. 17Fundamental Quality:Faithful RepresentationSuggests that accounting information is (1) complete (2) neutral - no bias (3) free from error. It does not imply perfect accuracy, as such an estimate can be free from error if the estimate development process is appropriate.
  18. 18Enhancing Quality: Comparability SuggestsSimilarity or consistency in reporting to enable comparisons between entities
  19. 19Enhancing Quality: Verifiability SuggestsIndependent parties using the same measurement methods will achieve similar results or arrive at a comparable conclusion
  20. 20Enhancing Quality: Timeliness SuggestsInformation is available when needed for decision making . Older information is less useful.
  21. 21Enhancing Quality: Understandability SuggestInvolves classifying information clearly and concisely
  22. 2210 Recognition, Measurement, and Disclosure ConceptsEconomic entity, going concern, monetary unit, periodicity, historical cost, revenue & expense recognition, matching, full disclosure, and cost/benefit
  23. 23Recognition, Measurement, and Disclosure Concepts: AssumptionsEconomic entity, going concern, monetary unit, periodicity
  24. 24Recognition, Measurement, and Disclosure Concepts: Principleshistorical cost, revenue & expense recognition, matching, full disclosure
  25. 25Recognition, Measurement, and Disclosure Concepts: Constraintscost/benefit
  26. 26Business or Economic Entity AssumptionPresumes that transactions can be identified with a particular firm or entity, separable from other entities
  27. 27Going Concern AssumptionPresumes the firm to have an unlimited or life long. Justifies the use of historical cost
  28. 28Monetary UnitAssumes that US firms and their use of the US dollar is justified as this monetary unit is relevant, easy to use, universally available, understandable, stable and, therefore, useful. Price level changes and from inflation and deflation are ignored.
  29. 29Periodicity (time) AssumptionAllows for economic positions and results to be divided into artificial time periods.
  30. 30Historical Cost PrincipleUnder US GAPP, continues to require that most assets and liabilities be accounted for and reported at cost. This is an objective and reliable measure, and, at the date of acquisition, historical cost and FMV are presumed to represent equivalent measures
  31. 31Revenue Recognition PrincipleProvides guidance on when revenue is recognized. Revenue us recognized when (1) earned - when services are provided or the ownership of goods is transferred (2) is not dependent on cash receipts - a sale may be made on credit terms (3) Is measured at the FMV of cash and other consideration received
  32. 32Matching PrincipleRequires that the expense follow or be matched with the revenue. In some cases a "rational and systematic" method of allocation is used when the matching principle is not otherwise clear or apparent.
  33. 33Full Disclosure PrincipleRequires that notes or footnotes and supplemental information be provided in addition to the basic financial statements
  34. 34Constraints to Accounting InformationCost benefit relations, as the production of information is not free
  35. 35SFACStatement of Financial Accounting Concepts
  36. 36Statement of Financial Accounting Concepts (SFAC)Codified by FASB ASC Topic 105, GAPP, details future concepts that may be used to develop accounting standards. They represent a road map for the future development of reporting policy and procedure
  37. 37ASCFASB Accounting Standard Codification
  38. 38FASB Accounting Standard Codification (ASC)The purpose of the codification is to be single authoritative reference for all US GAPP, or, a one stop shop for accounting guidance. All guidance in the codification carries equal level of authority

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REG Flashcards on Conceptual Framework,, created by Lindsey Williams on 12/03/2019.
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