Conceptual framework versus cost constraint- The conceptual framework of accounting explains the objectives and concepts for reporting financial information. It helps the accountants in providing the financial information which is most useful for existing as well as potential investors, lenders and other creditors. The qualitative characteristics of useful information is divided into two categories: Fundamental qualitative characteristics which includes relevance and faithful representation. Enhancing qualitative characteristics which includes comparability,verifiability, timeliness and understandability. However, these characteristics are subject to cost constraints, so the benefits to the users of information must justify the cost incurred by the entity. Requirement 1: To specify the qualitative characteristic or constraint that is most suitablewhen a financial item that may be useful to investors is not required to be reported because the cost of measuring and reporting this information is judged to be too great.

Question

Three statements are given below.a. A financial item that may be useful to investors is not required to be reported because thecost of measuring and reporting this information is judged to be too great.b. Timely information that is used to predict future events or provide feedback about priorevents is said to possess this characteristic.c. A quality of information that enables an analyst to evaluate the financial performance oftwo different companies in the same industry.Required:Give the qualitative characteristic or constraint that is most applicable to each of the statements.

Answer 1

Question

Chapter 2, Problem 17CE

To determine

Concept Introduction:

Conceptual framework versus cost constraint- The conceptual framework of accounting explains the objectives and concepts for reporting financial information. It helps the accountants in providing the financial information which is most useful for existing as well as potential investors, lenders and other creditors. The qualitative characteristics of useful information is divided into two categories:

Fundamental qualitative characteristics which includes relevance and faithful representation.

Enhancing qualitative characteristics which includes comparability,verifiability, timeliness and understandability.

However, these characteristics are subject to cost constraints, so the benefits to the users of information must justify the cost incurred by the entity.

Requirement 1:

To specify the qualitative characteristic or constraint that is most suitablewhen a financial item that may be useful to investors is not required to be reported because the cost of measuring and reporting this information is judged to be too great.

To determine

Concept Introduction:

Relevance: An information is relevant if omission or misstatement of such information can change a business decision and helps the users of information in predicting future events or confirming or correcting any past predictions.

Requirement 2:

To specify the qualitative characteristic or constraint that is most suitable when timely information that is used to predict future events or provide feedback about prior event.

To determine

Concept Introduction:

Comparability: It states that a financial information is useful if information of one company is comparable with another company’s similar information or it is comparable within same company with different time-period.

Requirement 3:

To specify the qualitative characteristic or constraint that is most suitable when a quality of information that enables an analyst to evaluate the financial performance of two different companies in the same industry.

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Three statements are given below.a. A financial item that may be useful to investors is not required to be reported because thecost of measuring and reporting this information is judged to be too great.b. Timely information that is used to predict future events or provide feedback about priorevents is said to possess this characteristic.c. A quality of information that enables an analyst to evaluate the financial performance oftwo different companies in the same industry.Required:Give the qualitative characteristic or constraint that is most applicable to each of the statements.

Match the qualitative characteristics below with the following statements. 1. Timeliness 2. Completeness 3. Free from error 4. Understandability 5. Faithful representation 6. Relevance 7. Neutrality 8. Confirmatory value a. Quality of information that assures users that information represents the economic phenomena that it purports to represent. b. Information about an economic phenomenon that corrects past or present expectations based on previous evaluations. c. The extent to which information is accurate in representing the economic substance of a transaction. d. Includes all the information that is necessary for a faithful representation of the economic phenomena that it purports to represent. e. Quality of information that allows users to comprehend its meaning.

Question 1 In analys rnings quality. Earnings quality refers to the reliability of the financial statements presented and whether it reflects the current business environment. Required: In 300 words, discuss the determinants of earnings quality

Answer 2

Question

Chapter 2, Problem 17CE

To determine

Concept Introduction:

Conceptual framework versus cost constraint- The conceptual framework of accounting explains the objectives and concepts for reporting financial information. It helps the accountants in providing the financial information which is most useful for existing as well as potential investors, lenders and other creditors. The qualitative characteristics of useful information is divided into two categories:

Fundamental qualitative characteristics which includes relevance and faithful representation.

Enhancing qualitative characteristics which includes comparability,verifiability, timeliness and understandability.

However, these characteristics are subject to cost constraints, so the benefits to the users of information must justify the cost incurred by the entity.

Requirement 1:

To specify the qualitative characteristic or constraint that is most suitablewhen a financial item that may be useful to investors is not required to be reported because the cost of measuring and reporting this information is judged to be too great.

To determine

Concept Introduction:

Relevance: An information is relevant if omission or misstatement of such information can change a business decision and helps the users of information in predicting future events or confirming or correcting any past predictions.

Requirement 2:

To specify the qualitative characteristic or constraint that is most suitable when timely information that is used to predict future events or provide feedback about prior event.

To determine

Concept Introduction:

Comparability: It states that a financial information is useful if information of one company is comparable with another company’s similar information or it is comparable within same company with different time-period.

Requirement 3:

To specify the qualitative characteristic or constraint that is most suitable when a quality of information that enables an analyst to evaluate the financial performance of two different companies in the same industry.

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Answer 3

Question

Chapter 2, Problem 17CE

To determine

Concept Introduction:

Conceptual framework versus cost constraint- The conceptual framework of accounting explains the objectives and concepts for reporting financial information. It helps the accountants in providing the financial information which is most useful for existing as well as potential investors, lenders and other creditors. The qualitative characteristics of useful information is divided into two categories:

Fundamental qualitative characteristics which includes relevance and faithful representation.

Enhancing qualitative characteristics which includes comparability,verifiability, timeliness and understandability.

However, these characteristics are subject to cost constraints, so the benefits to the users of information must justify the cost incurred by the entity.

Requirement 1:

To specify the qualitative characteristic or constraint that is most suitablewhen a financial item that may be useful to investors is not required to be reported because the cost of measuring and reporting this information is judged to be too great.

To determine

Concept Introduction:

Relevance: An information is relevant if omission or misstatement of such information can change a business decision and helps the users of information in predicting future events or confirming or correcting any past predictions.

Requirement 2:

To specify the qualitative characteristic or constraint that is most suitable when timely information that is used to predict future events or provide feedback about prior event.

To determine

Concept Introduction:

Comparability: It states that a financial information is useful if information of one company is comparable with another company’s similar information or it is comparable within same company with different time-period.

Requirement 3:

To specify the qualitative characteristic or constraint that is most suitable when a quality of information that enables an analyst to evaluate the financial performance of two different companies in the same industry.

Expert Solution & Answer

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Answer 4

Question

Chapter 2, Problem 17CE

To determine

Concept Introduction:

Conceptual framework versus cost constraint- The conceptual framework of accounting explains the objectives and concepts for reporting financial information. It helps the accountants in providing the financial information which is most useful for existing as well as potential investors, lenders and other creditors. The qualitative characteristics of useful information is divided into two categories:

Fundamental qualitative characteristics which includes relevance and faithful representation.

Enhancing qualitative characteristics which includes comparability,verifiability, timeliness and understandability.

However, these characteristics are subject to cost constraints, so the benefits to the users of information must justify the cost incurred by the entity.

Requirement 1:

To specify the qualitative characteristic or constraint that is most suitablewhen a financial item that may be useful to investors is not required to be reported because the cost of measuring and reporting this information is judged to be too great.

To determine

Concept Introduction:

Relevance: An information is relevant if omission or misstatement of such information can change a business decision and helps the users of information in predicting future events or confirming or correcting any past predictions.

Requirement 2:

To specify the qualitative characteristic or constraint that is most suitable when timely information that is used to predict future events or provide feedback about prior event.

To determine

Concept Introduction:

Comparability: It states that a financial information is useful if information of one company is comparable with another company’s similar information or it is comparable within same company with different time-period.

Requirement 3:

To specify the qualitative characteristic or constraint that is most suitable when a quality of information that enables an analyst to evaluate the financial performance of two different companies in the same industry.

Expert Solution & Answer

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Answer 5

Chapter 2, Problem 17CE

To determine

Concept Introduction:

Conceptual framework versus cost constraint- The conceptual framework of accounting explains the objectives and concepts for reporting financial information. It helps the accountants in providing the financial information which is most useful for existing as well as potential investors, lenders and other creditors. The qualitative characteristics of useful information is divided into two categories:

Fundamental qualitative characteristics which includes relevance and faithful representation.

Enhancing qualitative characteristics which includes comparability,verifiability, timeliness and understandability.

However, these characteristics are subject to cost constraints, so the benefits to the users of information must justify the cost incurred by the entity.

Requirement 1:

To specify the qualitative characteristic or constraint that is most suitablewhen a financial item that may be useful to investors is not required to be reported because the cost of measuring and reporting this information is judged to be too great.

To determine

Concept Introduction:

Relevance: An information is relevant if omission or misstatement of such information can change a business decision and helps the users of information in predicting future events or confirming or correcting any past predictions.

Requirement 2:

To specify the qualitative characteristic or constraint that is most suitable when timely information that is used to predict future events or provide feedback about prior event.

To determine

Concept Introduction:

Comparability: It states that a financial information is useful if information of one company is comparable with another company’s similar information or it is comparable within same company with different time-period.

Requirement 3:

To specify the qualitative characteristic or constraint that is most suitable when a quality of information that enables an analyst to evaluate the financial performance of two different companies in the same industry.

Answer 6

Chapter 2, Problem 17CE

To determine

Concept Introduction:

Conceptual framework versus cost constraint- The conceptual framework of accounting explains the objectives and concepts for reporting financial information. It helps the accountants in providing the financial information which is most useful for existing as well as potential investors, lenders and other creditors. The qualitative characteristics of useful information is divided into two categories:

Fundamental qualitative characteristics which includes relevance and faithful representation.

Enhancing qualitative characteristics which includes comparability,verifiability, timeliness and understandability.

However, these characteristics are subject to cost constraints, so the benefits to the users of information must justify the cost incurred by the entity.

Requirement 1:

To specify the qualitative characteristic or constraint that is most suitablewhen a financial item that may be useful to investors is not required to be reported because the cost of measuring and reporting this information is judged to be too great.

Answer 7

Chapter 2, Problem 17CE

To determine

Concept Introduction:

Conceptual framework versus cost constraint- The conceptual framework of accounting explains the objectives and concepts for reporting financial information. It helps the accountants in providing the financial information which is most useful for existing as well as potential investors, lenders and other creditors. The qualitative characteristics of useful information is divided into two categories:

Fundamental qualitative characteristics which includes relevance and faithful representation.

Enhancing qualitative characteristics which includes comparability,verifiability, timeliness and understandability.

However, these characteristics are subject to cost constraints, so the benefits to the users of information must justify the cost incurred by the entity.

Requirement 1:

To specify the qualitative characteristic or constraint that is most suitablewhen a financial item that may be useful to investors is not required to be reported because the cost of measuring and reporting this information is judged to be too great.

Answer 8

To determine

Concept Introduction:

Relevance: An information is relevant if omission or misstatement of such information can change a business decision and helps the users of information in predicting future events or confirming or correcting any past predictions.

Requirement 2:

To specify the qualitative characteristic or constraint that is most suitable when timely information that is used to predict future events or provide feedback about prior event.

Answer 9

To determine

Concept Introduction:

Relevance: An information is relevant if omission or misstatement of such information can change a business decision and helps the users of information in predicting future events or confirming or correcting any past predictions.

Requirement 2:

To specify the qualitative characteristic or constraint that is most suitable when timely information that is used to predict future events or provide feedback about prior event.

Answer 10

To determine

Concept Introduction:

Comparability: It states that a financial information is useful if information of one company is comparable with another company’s similar information or it is comparable within same company with different time-period.

Requirement 3:

To specify the qualitative characteristic or constraint that is most suitable when a quality of information that enables an analyst to evaluate the financial performance of two different companies in the same industry.

Answer 11

To determine

Concept Introduction:

Comparability: It states that a financial information is useful if information of one company is comparable with another company’s similar information or it is comparable within same company with different time-period.

Requirement 3:

To specify the qualitative characteristic or constraint that is most suitable when a quality of information that enables an analyst to evaluate the financial performance of two different companies in the same industry.

Answer 12

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Ch. 2 - What is the conceptual framework of accounting?Ch. 2 - Prob. 2DQ Ch. 2 - Prob. 3DQ Ch. 2 - Prob. 4DQ Ch. 2 - Describe the constraint on providing useful...Ch. 2 - Prob. 6DQ Ch. 2 - Prob. 7DQ Ch. 2 - Prob. 8DQ Ch. 2 - Of all the events that occur each day, how would...Ch. 2 - Prob. 10DQ

Solution Summary: The author explains the conceptual framework of accounting's objectives and concepts for reporting financial information. Cost constraint arises when a financial item that may be useful to investors is not required to be reported because the cost of measuring and reporting this

Chapter 2 Solutions