ACCA – SBR Study Questions With Complete Solutions

>>>>>> FRAMEWORKS What if not followed IAS or IFRS? correct answer: Not True and Fair = UNETHICAL Why PRINCIPLES not RULES? correct answer: Principles harder to circumvent Why have a FRAMEWORK? correct answer: Provides guidances for standards setters Gives guidance where no standards exist Helps all parties with intrerpretation 2 x Useful qualities of financial information correct answer: RELEVANCE = Influences Decisions FAITHFUL REPRESENTATION = Complete, Neutral, No Errors What does RELEVANCE offer? correct answer: PREDICTIVE VALUE CONFIRMATORY VALUE 4 X Qualities of FAITHFUL REPRESENTATION correct answer: TIMELY UNDERSTANDABLE VERIFIABLE COMPARABLE What are framework criticisms? correct answer: accounts are historic - focus on timeliness Some assets not recognised: - internal goodwill Estimates = subjective = reduces comparability Disclosures = cluttered / generic Cashflows >>>>>>>>> correct answer: What are three parts of a cashflow? correct answer: Operations - Day-to-day operations Investing - Long term assets Financing - Equity, Loans Where do TAXES go? correct answer: Operating Activities Where does LOAN INCOME go? correct answer: Financing Where does SALE OF ASSETS go? correct answer: Investing Describe the INDIRECT METHOD for Operating Activities correct answer: *Profit before TAX* Add: Adjust for Finance Costs (Not Ops) Less: Adjust for Investment Income (Not ops) --------------------------------- *Profit from Operations*