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Chapter 1: Question 4MCQ (page 21)

The authoritative status of the conceptual framework 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

Expert verified

The correct option is (a).

Step by step solution

01

Meaning of the Conceptual Framework

The Conceptual Framework determines the concepts of financial reporting. This ensures that there is conceptual consistency between the standards and the resulting information is useful to the users of the accounting information.

02

Explanation for the correct option

The primary purpose of the Conceptual Framework was to assist the IASB in the development of future IFRSs and in its review of existing IFRSs. The Conceptual Framework may also assist preparers of financial statements in understanding the accounting standards.

The authoritative status of the Conceptual Framework for financial reporting is that it is used when there is no standard or interpretation related to the reporting issues under consideration.

This is by definition what The Conceptual Framework was created for, therefore the correct answer is (a)

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Most popular questions from this chapter

In what ways it felt that the pronouncements issued by the Financial Accounting Standards Board would carry greater weight than the opinions issued by the Accounting Principles Board?

Question: Economic consequences of accounting standard-setting means:

(a) standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.

(b) standard-setters must ensure that no new costs are incurred when a new standard is issued.

(c) the objective of financial reporting should be politically motivated to ensure acceptance by the general public.

(d) accounting standards can have detrimental impacts on the wealth levels of the providers of financial information

Question: CA1-12 GROUPWORK (GAAP Terminology) Wayne Rogers, an administrator at a major university, recently said, “I’ve got some CDs in my IRA, which I set up to beat the IRS.” As elsewhere, in the world of accounting and finance, it often helps to be fluent in abbreviations and acronyms.

Instructions

Presented below is a list of common accounting acronyms. Identify the term for which each acronym stands, and provide a brief definition of each term.

(a) AICPA (e) FAF (l) FASB(b) CAP (f) FASAC (j) SEC(c) EITF (g) GAAP (k) IASB(d) APB (h) CPA

The objective of financial reporting places most emphasis on:

  1. Reporting to capital providers.
  2. Reporting on stewardship
  3. Providing specific guidance related to specific needs.
  4. Providing information to individuals who are experts in the field.

The chair of the FASB at one time noted that “the flow of standards can only be slowed if (1) producers focus less on quarterly earnings per share and tax benefits and more on quality products,and

(2) accountants and lawyers rely less on rules and law and more on professional judgement and conduct.” Explain his comment.
See all solutions

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