ch02 international accounting 12th

Chapter2-1Chapter2-2CHAPTER2CONCEPTUALFRAMEWORKUNDERLYINGFINANCIALACCOUNTINGIntermediateAccounting13thEditionKieso,Weygandt,andWarfieldChapter2-31.Describetheusefulnessofaconceptualframework.2.DescribetheFASB’seffortstoconstructaconceptualframework.3.Understandtheobjectivesoffinancialreporting.4.Identifythequalitativecharacteristicsofaccountinginformation.5.Definethebasicelementsoffinancialstatements.6.Describethebasicassumptionsofaccounting.7.Explaintheapplicationofthebasicprinciplesofaccounting.8.Describetheimpactthatconstraintshaveonreportingaccountinginformation.LearningObjectivesChapter2-4DecisionusefulnessInformationabouteconomicresourcesConceptualFrameworkFirstLevel:BasicObjectivesSecondLevel:FundamentalConceptsThirdLevel:RecognitionandMeasurementNeedDevelopmentQualitativecharacteristicsBasicelementsBasicassumptionsBasicprinciplesConstraintsFinancialAccountingandAccountingStandardsChapter2-5TheNeedforaConceptualFrameworkTodevelopacoherentsetofstandardsandrulesTosolvenewandemergingpracticalproblemsConceptualFrameworkLO1Describetheusefulnessofaconceptualframework.Chapter2-6Review:Aconceptualframeworkunderlyingfinancialaccountingisimportantbecauseitcanleadtoconsistentstandardsanditprescribesthenature,function,andlimitsoffinancialaccountingandfinancialstatements.ConceptualFrameworkLO1Describetheusefulnessofaconceptualframework.TrueChapter2-7Review:Aconceptualframeworkunderlyingfinancialaccountingisnecessarybecausefutureaccountingpracticeproblemscanbesolvedbyreferencetotheconceptualframeworkandaformalstandard-settingbodywillnotbenecessary.ConceptualFrameworkLO1Describetheusefulnessofaconceptualframework.FalseChapter2-8Objective2TheFASBhasissuedsixStatementsofFinancialAccountingConcepts(SFAC)forbusinessenterprises.DevelopmentofConceptualFrameworkSFACNo.1-ObjectivesofFinancialReportingSFACNo.2-QualitativeCharacteristicsofAccountingInformationSFACNo.3-ElementsofFinancialStatements(supercededbySFACNo.6)SFACNo.5-RecognitionandMeasurementinFinancialStatementsSFACNo.6-ElementsofFinancialStatements(replacesSFACNo.3)SFACNo.7-UsingCashFlowInformationandPresentValueinAccountingMeasurementsLO2DescribetheFASB’seffortstoconstructaconceptualframework.Chapter2-9TheFrameworkiscomprisedofthreelevels:FirstLevel=BasicObjectivesSecondLevel=QualitativeCharacteristicsandBasicElementsThirdLevel=RecognitionandMeasurementConcepts.ConceptualFrameworkLO2DescribetheFASB’seffortstoconstructaconceptualframework.TheFASBandtheIASBhaveagreedonajointprojecttodevelopacommonandimprovedconceptualframework.Chapter2-10ASSUMPTIONS1.Economicentity2.Goingconcern3.Monetaryunit4.PeriodicityPRINCIPLES1.Measurement2.Revenuerecognition3.Expenserecognition4.FulldisclosureCONSTRAINTS1.Cost-benefit2.Materiality3.Industrypractice4.ConservatismOBJECTIVES1.Usefulininvestmentandcreditdecisions2.Usefulinassessingfuturecashflows3.Aboutenterpriseresources,claimstoresources,andchangesinthemELEMENTSAssets,Liabilities,andEquityInvestmentsbyownersDistributiontoownersComprehensiveincomeRevenuesandExpensesGainsandLossesIllustration2-7ConceptualFrameworkforFinancialReportingFirstlevelSecondlevelThirdlevelLO2DescribetheFASB’seffortstoconstructaconceptualframework.QUALITATIVECHARACTERISTICSRelevanceReliabilityComparabilityConsistencyChapter2-11WhataretheStatementsofFinancialAccountingConceptsintendedtoestablish?a.Generallyacceptedaccountingprinciplesinfinancialreportingbybusinessenterprises.b.Themeaningof“Presentfairlyinaccordancewithgenerallyacceptedaccountingprinciples.”c.Theobjectivesandconceptsforuseindevelopingstandardsoffinancialaccountingandreporting.d.Thehierarchyofsourcesofgenerallyacceptedaccountingprinciples.ConceptualFrameworkLO2DescribetheFASB’seffortstoconstructaconceptualframework.Review:(CPAadapted)Chapter2-12Financialreportingshouldprovideinformationthat:(a)isusefultopresentandpotentialinvestorsandcreditorsandotherusersinmakingrationalinvestment,credit,andsimilardecisions.(b)helpspresentandpotentialinvestorsandcreditorsandotherusersinassessingtheamounts,timing,anduncertaintyofprospectivecashreceipts.(c)portraystheeconomicresourcesofanenterprise,theclaimstothoseresources,andtheeffectsoftransactions,events,andcircumstancesthatchangeitsresourcesandclaimstothoseresources.FirstLevel:BasicObjectivesLO3Understandtheobjectivesoffinancialreporting.Chapter2-13ThecurrentproposedconvergedframeworkadoptstheFASB’sfocusoninvestorsandcreditors.AccordingtotheFASBconceptualframework,theobjectivesoffinancialreportingforbusinessenterprisesarebasedon?a.Generallyacceptedaccountingprinciplesb.Reportingonmanagement’sstewardship.c.Theneedforconservatism.d.Theneedsoftheusersoftheinformation.LO3Review:FirstLevel:BasicObjectivesChapter2-14Question:Howdoesacompanychooseanacceptableaccountingmethod,theamountandtypesofinformationtodisclose,andtheformatinwhichtopresentit?SecondLevel:FundamentalConceptsLO4Identifythequalitativecharacteristicsofaccountinginformation.Answer:Bydeterminingwhichalternativeprovidesthemostusefulinformationfordecision-makingpurposes(decisionusefulness).Chapter2