CPA Excel 14: IASB Framework questions with correct answers

IASB's Framework for the Preparation and Presentation of Financial Statements (Framework) CORRECT ANSWER Similar to the FASB's Concepts Statements, but shorter. IASB Framework does not constitute GAAP, but provides basis for development. Intended to apply to the financial statements of all entities, public or private. If standard vs. Framework, standard wins. If no applicable accounting, Framework may be guidance for GAAP. Purposes of IASB Framework CORRECT ANSWER 1. To assist the Board in developing new IASs and reviewing existing IASs; (The Framework was written when the IASC was the body promulgating standards. "IASs" here may be more loosely interpreted to include IASs, IFRSs, SICs, and IFRICs.) 2. To assist the Board in promoting harmonization of standards by providing a basis for reducing the number of alternative accounting treatments permitted by IASs; 3. To assist national standard-setting bodies in developing standards; 4. To assist preparers in applying IASs and dealing with topics not yet covered by IASs; 5. To assist auditors in forming an opinion as to whether financial statements conform with IASs; 6. To assist users in interpreting financial statements prepared in conformity with IASs; 7. To provide information for parties interested in the work of the IASC (now IASB). General purpose financial statements CORRECT ANSWER Framework concerned with general-purpose financial statements directed to provide financial information to a wide variety of users. "Financial statements" include (1) balance sheet, (2) income statement, (3) statement of changes in financial position (note that a later IAS requires a statement of cash flows), (4) notes and supplementary material. Development of a common conceptual framework project CORRECT ANSWER Purpose is to develop a framework that will be the underlying conceptual support for future principles-based internally consistent accounting standards for the most useful financial reporting.