Question

Question: The authoritative status of The Conceptual Framework for Financial Reporting is as follows:

(a) It is used when there is no standard or interpretation related to the reporting issues under consideration.

(b) It is not as authoritative as a standard but takes precedence over any interpretation related to the reporting issue.

(c) It takes precedence over all other authoritative literature.

(d) It has no authoritative status.

Short answer

Answer

The correct option is (a) It is used when there is no standard or interpretation related to the reporting issue under consideration.

Step-by-step solution

Definition of Financial Reporting

The process in which the business entity communicates the financial information of the business entity by reporting it into the financial statements is known as financial reporting.

Explanation for the correct option

If there is an absence of interpretation or standard relating to a specific reporting issue, the business entity will use the authoritative status of the conceptual framework.

Explanation for incorrect options

1. Option (b) is incorrect because the authoritative status is not preferred over any interpretation. It is adopted in the absence of interpretation and standards.
2. Option (c) is incorrect because the authoritative literature is not related to the conceptual framework. Instead, it includes types of questions related to the accounting regulations and standards.
3. Option (d) is incorrect because the conceptual framework has authoritative status. It is used when the standards and interpretations are not available for the specific transaction.