Statement 1: If financial information is to be useful, it must be relevant or faithfully represent what it purports to represent. Statement 2: Cost is a pervasive constraint on the reporting entity's ability to provide useful financial information. a Statement 1 is true, Statement 2 is false b Both are false c Both are true d Statement 1 is false, Statement 2 is true

Statement 1: If financial information is to be useful, it must be relevant or faithfully represent what it purports to represent. Statement 2: Cost is a pervasive constraint on the reporting entity's ability to provide useful financial information. a Statement 1 is true, Statement 2 is false b Both are false c Both are true d Statement 1 is false, Statement 2 is true

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter2: Financial Reporting: Its Conceptual Framework

Section: Chapter Questions

Problem 5MC

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1) Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position. (a) The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability. (b) Relevant information has predictive value, confirmatory value, or both. (c) Conservatism, a prudent reaction to uncertainty, is considered a constraint of financial reporting. (d) Information that is a faithful representation is characterized as having predictive or confirmatory value. (e) Comparability pertains only to the reporting of information in a similar manner for different companies. (f) Verifiability is solely an enhancing characteristic for faithful representation. (g) In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities
(Usefulness, Objective of Financial Reporting, Qualitative Characteristics) Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting yourposition.(a) The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability.(b) Relevant information only has predictive value, confirmatory value, or both.(c) Information that is a faithful representation is characterized as having predictive or confirmatory value.(d) Comparability pertains only to the reporting of information in a similar manner for different companies.(e) Verifiability is solely an enhancing characteristic for faithful representation.(f) In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities.
PROBLEM 1: TRUE OR FALSE All changes in an entity’s economic resources and claims to those resources result from the entity’s financial performance. The qualitative characteristics of useful information apply only to the financial information provided in the financial statements According to IFRS® Practice Statement 2 Making Materiality Judgments, the cost is an important consideration when making materiality judgments When making materiality judgments, a quantitative assessment alone is not always sufficient to conclude that an item of information is not material Materiality judgments apply only to items that are recognized - but not to those that are unrecognized The more significant the qualitative factors are, the lower the quantitative thresholds will be. Thus, an item with a zero amount can be material in light of qualitative thresholds. When making materiality judgments, an entity should judge an item’s materiality only on its own and not in combination with other information…
The fundamental qualitative characteristics that financial information must possess to be useful to the primary users of general purpose financial reports—identified in the Conceptual Framework are ‘relevance’ and ‘faithful representation’. Required: a) Provide one example where information is relevant but not faithfully represented. (explain) b) Provide one example where information is not relevant but is faithfully represented. (explain) c) Provide one example where information is relevant and faithfully represented. (breifly explain)
Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position. a. The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability. b. Relevant information only has predictive value, confirmatory value, or both. c. Information that is a faithful representation is characterized as having predictive or confirmatory value. d. Comparability pertains only to the reporting of information in a similar manner for different companies. e. Verifiability is solely an enhancing characteristic for faithful representation. f. In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities.
1. What are some of the limitations of cost accounting? 2. State whether the following questions is True (T) or False (F): a) Management accounting provides economic and financial information for external users such as shareholders, creditors and banks. b) Financial accounting provides information for managers and other internal users. c) Financial accounting reports past results. d) Management accounting is future oriented. e) Management accounting is required to follow generally accepted accounting principles. f) Financial accounting examines monetary and non-monetary events. g) Cost accounting is used as a means of fixing a selling price. h) Cost accounting looks at the company as a whole and not at the various units, jobs or processes. i) Financial accounting is concerned with how and why profits arise. j) Cost accounting depends entirely on historical information.
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Choose the incorrect statement:a.) The objective of the external financial statements is to communicate the economic effects of completed transactions and other events on the entity.b.) The practice of accounting requires considerable professional judgment.c.) Security analysis use information form financial statements and other sources to projects future earnings.d.) The assessment of earning quality has become an exact science.
1. State whether the following questions is True (T) or False (F). a. Management accounting is future oriented. b. Management accounting is required to follow generally accepted accounting principles. c. Financial accounting examines monetary and non-monetary events. d. Cost accounting is used as a means of fixing a selling price.
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