10/15/24, 9:30 Ch02ii intermediate accounting test
AM bank
CHAPTER 2
Conceptual Framework for Financial
Reporting
ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC)
Brief Concepts
Topics Questions Exercise Exercises for
s Analysis
1. Conceptual 1 1, 2
framework– general.
2. Objective of 2, 6 1, 2 3
financial
reporting.
3. Qualitative 3, 4, 5, 7 1, 2, 3, 4 1, 2, 3, 4 4, 9
characteristics of
accounting.
4. Elements of 8, 9, 21 5, 6 5
financial
statements.
5. Basic assumptions. 10, 11, 12 7, 8, 13 6, 7
6. Basic
principles: 13, 14, 15 9, 10, 13 6, 7, 9, 10 5, 6
a. Measurement.
b. Revenue recognition. 16, 17, 18, 19, 9 7, 9, 10 5, 6
c. Expense recognition. 20 9, 13 6, 7, 9, 10 5, 6, 7, 8,
10
d. Full disclosure. 22, 23 9, 13 6, 7, 8, 9,
10
7. International 27, 28, 29 9, 10
standards–
comprehensive.
8. Constraints. 24, 25, 26 11, 12, 13, 3, 6, 7 11
14
9. Comprehensive 27, 28, 29 14 6, 7, 9, 10
assignments on
assumptions, principles,
and constraints.
Copyright © 2011 John Wiley & Sons, Inc. Kieso, IFRS, 1/e, Solutions Manual (For Instructor Use Only) 2-1
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,10/15/24, 9:30 Ch02ii intermediate accounting test
AM bank
ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE)
Learning Objectives Brief Exercises Exercises
1. Describe the usefulness of a conceptual framework.
2. Describe efforts to construct a conceptual framework.
3. Understand the objective of financial reporting. 1, 2
4. Identify the qualitative characteristics of 1, 2, 3, 4 1, 2, 3, 4
accounting information.
5. Define the basic elements of financial statements. 5, 6 5
6. Describe the basic assumptions of accounting. 7, 8, 13 6, 7
7. Explain the application of the basic
principles of accounting. 9, 10, 13 6, 7, 8, 9, 10
8. Describe the impact that constraints have on
reporting accounting information. 11, 12, 13, 14 6, 7
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,10/15/24, 9:30 Ch02ii intermediate accounting test
AM bank
ASSIGNMENT CHARACTERISTICS TABLE
Level Time
Item of (minute
Difficult s)
Description y
E2-1 Usefulness, objective of financial reporting. Moderate 10–15
E2-2 Usefulness, objective of financial reporting, Moderate 10–15
qualitative characteristics.
E2-3 Qualitative characteristics. Moderate 15–20
E2-4 Qualitative characteristics. Simple 15–20
E2-5 Elements of financial statements. Simple 10–15
E2-6 Assumptions, principles, and constraints. Simple 15–20
E2-7 Assumptions, principles, and constraints. Moderate 20–25
E2-8 Full disclosure principle. Complex 20–25
E2-9 Accounting principles–comprehensive. Moderate 20–25
E2-10 Accounting principles–comprehensive. Moderate 20–25
CA2-1 Conceptual framework–general. Simple 20–25
CA2-2 Conceptual framework–general. Simple 25–35
CA2-3 Objective of financial reporting. Moderate 25–35
CA2-4 Qualitative characteristics. Moderate 30–35
CA2-5 Revenue recognition principle. Complex 25–30
CA2-6 Revenue and expense recognition principles. Moderate 30–35
CA2-7 Expense recognition principle. Complex 20–25
CA2-8 Expense recognition principle. Moderate 20–30
CA2-9 Qualitative characteristics. Moderate 20–30
CA2-10 Expense recognition principle. Moderate 20–25
CA2-11 Cost-Benefit. Moderate 30–35
Copyright © 2011 John Wiley & Sons, Inc. Kieso, IFRS, 1/e, Solutions Manual (For Instructor Use Only) 2-3
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, 10/15/24, 9:30 Ch02ii intermediate accounting test
AM bank
ANSWERS TO QUESTIONS
1. A conceptual framework is a coherent system of concepts that flow from an objective.
The objective identifies the purpose of financial reporting. The other concepts
provide guidance on
(1) identifying the boundaries of financial reporting, (2) selecting the transactions,
other events, and circumstances to be represented, (3) how they should be
recognized and measured, and (4) how they should be summarized and reported. A
conceptual framework is necessary in financial accounting for the following reasons:
(1) It will enable the IASB to issue more useful and consistent standards in the future.
(2) New issues will be more quickly solvable by reference to an existing framework of basic theory.
(3) It will increase financial statement users’ understanding of and confidence in financial reporting.
(4) It will enhance comparability among companies’ financial statements.
2. The primary objective of financial reporting is as follows:
The objective of general purpose financial reporting is to provide financial information
about the reporting entity that is useful to present and potential equity investors,
lenders, and other creditors in making decisions in their capacity as capital
providers. Information that is decision useful to capital providers may also be
useful to other users of financial reporting who are not capital providers.
3. “Qualitative characteristics of accounting information” are those characteristics which
contribute to the quality or value of the information. The fundamental qualitative
characteristics are relevance and faithful representation.
4. Relevance and faithful representation are the two fundamental qualities that make
accounting information useful for decision-making. To be relevant, accounting
information must be capable of making a difference in a decision. Information with no
bearing on a decision is irrelevant. Financial information is capable of making a
difference when it has predictive value, confirmatory value, or both. Faithful
representation means that the item is representative of the real-world phenomenon
that it purports to represent. Faithful representation is a necessity because most
users have neither the time nor the expertise to evaluate the factual content of the
information. In other words, faithful representation means that the numbers and
descriptions match what really existed or happened. To be a faithful representation,
information must be complete, neutral, and free of material error.
5. The enhancing qualitative characteristics are comparability, verifiability, timeliness, and
understandability. These characteristics enhance the decision usefulness of financial
reporting information that is relevant and faithfully represented. Enhancing qualitative
characteristics are complementary to the fundamental qualitative characteristics.
Enhancing qualitative characteristics distinguish more- useful information from less-
useful information.
6. In providing information to users of financial statements, the Board relies on general-
purpose financial statements. The intent of such statements is to provide the most
useful information possible at minimal cost to various user groups. Underlying
these objectives is the notion that users need reasonable knowledge of business
and financial accounting matters to understand the information contained in
financial statements. This point is important: it means that in the preparation of
financial statements a level of reasonable competence can be assumed; this has an
impact on the way and the extent to which information is reported.
7. Comparability facilitates comparisons between information about two different
enterprises at a particular point in time. Consistency facilitates comparisons between
information about the same enterprise at two different points in time.
2-4 Copyright © 2011 John Wiley & Sons, Inc. Kieso, IFRS, 1/e, Solutions Manual (For Instructor Use Only)
about:bl 4/
AM bank
CHAPTER 2
Conceptual Framework for Financial
Reporting
ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC)
Brief Concepts
Topics Questions Exercise Exercises for
s Analysis
1. Conceptual 1 1, 2
framework– general.
2. Objective of 2, 6 1, 2 3
financial
reporting.
3. Qualitative 3, 4, 5, 7 1, 2, 3, 4 1, 2, 3, 4 4, 9
characteristics of
accounting.
4. Elements of 8, 9, 21 5, 6 5
financial
statements.
5. Basic assumptions. 10, 11, 12 7, 8, 13 6, 7
6. Basic
principles: 13, 14, 15 9, 10, 13 6, 7, 9, 10 5, 6
a. Measurement.
b. Revenue recognition. 16, 17, 18, 19, 9 7, 9, 10 5, 6
c. Expense recognition. 20 9, 13 6, 7, 9, 10 5, 6, 7, 8,
10
d. Full disclosure. 22, 23 9, 13 6, 7, 8, 9,
10
7. International 27, 28, 29 9, 10
standards–
comprehensive.
8. Constraints. 24, 25, 26 11, 12, 13, 3, 6, 7 11
14
9. Comprehensive 27, 28, 29 14 6, 7, 9, 10
assignments on
assumptions, principles,
and constraints.
Copyright © 2011 John Wiley & Sons, Inc. Kieso, IFRS, 1/e, Solutions Manual (For Instructor Use Only) 2-1
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,10/15/24, 9:30 Ch02ii intermediate accounting test
AM bank
ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE)
Learning Objectives Brief Exercises Exercises
1. Describe the usefulness of a conceptual framework.
2. Describe efforts to construct a conceptual framework.
3. Understand the objective of financial reporting. 1, 2
4. Identify the qualitative characteristics of 1, 2, 3, 4 1, 2, 3, 4
accounting information.
5. Define the basic elements of financial statements. 5, 6 5
6. Describe the basic assumptions of accounting. 7, 8, 13 6, 7
7. Explain the application of the basic
principles of accounting. 9, 10, 13 6, 7, 8, 9, 10
8. Describe the impact that constraints have on
reporting accounting information. 11, 12, 13, 14 6, 7
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,10/15/24, 9:30 Ch02ii intermediate accounting test
AM bank
ASSIGNMENT CHARACTERISTICS TABLE
Level Time
Item of (minute
Difficult s)
Description y
E2-1 Usefulness, objective of financial reporting. Moderate 10–15
E2-2 Usefulness, objective of financial reporting, Moderate 10–15
qualitative characteristics.
E2-3 Qualitative characteristics. Moderate 15–20
E2-4 Qualitative characteristics. Simple 15–20
E2-5 Elements of financial statements. Simple 10–15
E2-6 Assumptions, principles, and constraints. Simple 15–20
E2-7 Assumptions, principles, and constraints. Moderate 20–25
E2-8 Full disclosure principle. Complex 20–25
E2-9 Accounting principles–comprehensive. Moderate 20–25
E2-10 Accounting principles–comprehensive. Moderate 20–25
CA2-1 Conceptual framework–general. Simple 20–25
CA2-2 Conceptual framework–general. Simple 25–35
CA2-3 Objective of financial reporting. Moderate 25–35
CA2-4 Qualitative characteristics. Moderate 30–35
CA2-5 Revenue recognition principle. Complex 25–30
CA2-6 Revenue and expense recognition principles. Moderate 30–35
CA2-7 Expense recognition principle. Complex 20–25
CA2-8 Expense recognition principle. Moderate 20–30
CA2-9 Qualitative characteristics. Moderate 20–30
CA2-10 Expense recognition principle. Moderate 20–25
CA2-11 Cost-Benefit. Moderate 30–35
Copyright © 2011 John Wiley & Sons, Inc. Kieso, IFRS, 1/e, Solutions Manual (For Instructor Use Only) 2-3
about:bl 3/
, 10/15/24, 9:30 Ch02ii intermediate accounting test
AM bank
ANSWERS TO QUESTIONS
1. A conceptual framework is a coherent system of concepts that flow from an objective.
The objective identifies the purpose of financial reporting. The other concepts
provide guidance on
(1) identifying the boundaries of financial reporting, (2) selecting the transactions,
other events, and circumstances to be represented, (3) how they should be
recognized and measured, and (4) how they should be summarized and reported. A
conceptual framework is necessary in financial accounting for the following reasons:
(1) It will enable the IASB to issue more useful and consistent standards in the future.
(2) New issues will be more quickly solvable by reference to an existing framework of basic theory.
(3) It will increase financial statement users’ understanding of and confidence in financial reporting.
(4) It will enhance comparability among companies’ financial statements.
2. The primary objective of financial reporting is as follows:
The objective of general purpose financial reporting is to provide financial information
about the reporting entity that is useful to present and potential equity investors,
lenders, and other creditors in making decisions in their capacity as capital
providers. Information that is decision useful to capital providers may also be
useful to other users of financial reporting who are not capital providers.
3. “Qualitative characteristics of accounting information” are those characteristics which
contribute to the quality or value of the information. The fundamental qualitative
characteristics are relevance and faithful representation.
4. Relevance and faithful representation are the two fundamental qualities that make
accounting information useful for decision-making. To be relevant, accounting
information must be capable of making a difference in a decision. Information with no
bearing on a decision is irrelevant. Financial information is capable of making a
difference when it has predictive value, confirmatory value, or both. Faithful
representation means that the item is representative of the real-world phenomenon
that it purports to represent. Faithful representation is a necessity because most
users have neither the time nor the expertise to evaluate the factual content of the
information. In other words, faithful representation means that the numbers and
descriptions match what really existed or happened. To be a faithful representation,
information must be complete, neutral, and free of material error.
5. The enhancing qualitative characteristics are comparability, verifiability, timeliness, and
understandability. These characteristics enhance the decision usefulness of financial
reporting information that is relevant and faithfully represented. Enhancing qualitative
characteristics are complementary to the fundamental qualitative characteristics.
Enhancing qualitative characteristics distinguish more- useful information from less-
useful information.
6. In providing information to users of financial statements, the Board relies on general-
purpose financial statements. The intent of such statements is to provide the most
useful information possible at minimal cost to various user groups. Underlying
these objectives is the notion that users need reasonable knowledge of business
and financial accounting matters to understand the information contained in
financial statements. This point is important: it means that in the preparation of
financial statements a level of reasonable competence can be assumed; this has an
impact on the way and the extent to which information is reported.
7. Comparability facilitates comparisons between information about two different
enterprises at a particular point in time. Consistency facilitates comparisons between
information about the same enterprise at two different points in time.
2-4 Copyright © 2011 John Wiley & Sons, Inc. Kieso, IFRS, 1/e, Solutions Manual (For Instructor Use Only)
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