20 Lecture - IASB’s Framework (Contd.)

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20 Lecture

MGT401

Midterm & Final Term Short Notes

IASB’s Framework (Contd.)

The IASB's Framework also emphasizes the importance of substance over form, which means that the economic substance of a transaction should be reflected in the financial statements, regardless of its legal form. The Framework also provides guida


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  1. What is the key concept of the IASB's Framework? A) Reliability B) Comparability C) Understandability D) All of the above Answer: D

  2. Which of the following elements are recognized in financial statements according to the IASB's Framework? A) Assets B) Liabilities C) Income D) All of the above Answer: D

  3. The IASB's Framework promotes transparency and accountability by requiring companies to provide what? A) Relevant and reliable information B) Excessive information C) Irrelevant and unreliable information D) None of the above Answer: A

  4. What is the importance of substance over form in the IASB's Framework? A) Economic substance of a transaction should be reflected in the financial statements B) Legal form of a transaction should be reflected in the financial statements C) Both A and B D) None of the above Answer: A

  5. The IASB's Framework provides guidance on which of the following? A) When to recognize gains and losses B) How to measure assets and liabilities C) When to recognize an item as an asset or liability D) All of the above Answer: D

  6. The IASB's Framework is regularly updated to reflect changes in which of the following? A) Business practices B) Financial reporting requirements C) Both A and B D) None of the above Answer: C

  7. Which of the following is NOT a key principle of the IASB's Framework? A) Relevance B) Reliability C) Comparability D) Sustainability Answer: D

  8. What is the role of the IASB in the development and update of the Framework? A) Develop and update the Framework B) Enforce compliance with the Framework C) Both A and B D) None of the above Answer: A

  9. What is the purpose of the recognition and measurement criteria in the IASB's Framework? A) Ensure that financial statement elements are recognized when they meet the definition of an asset, liability, income, or expense B) Ensure that financial statements are free from material errors and omissions C) Ensure that financial statements are presented in a clear and concise manner D) None of the above Answer: A

  10. The IASB's Framework is used by which of the following groups? A) Companies and accounting professionals B) Auditors and regulators C) Both A and B D) None of the above Answer: C



Subjective Short Notes
Midterm & Finalterm Prepration
Past papers included

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  1. What is the purpose of the IASB's Framework? Answer: The purpose of the IASB's Framework is to provide guidance on how to prepare and present financial statements that provide relevant, reliable, and comparable information to the stakeholders.

  2. What is the key concept of the IASB's Framework? Answer: The key concept of the IASB's Framework is that financial statements should provide relevant, reliable, and comparable information about the company's financial position, performance, and cash flows.

  3. What is the importance of consistency in financial reporting according to the IASB's Framework? Answer: Consistency is important because it ensures that the financial statements are comparable over time and across different companies, which helps stakeholders make informed decisions.

  4. How does the IASB's Framework define an asset? Answer: An asset is defined as a resource controlled by the entity as a result of past events, which is expected to generate future economic benefits.

  5. What is the role of the IASB in the development and update of the Framework? Answer: The IASB is responsible for developing and updating the Framework to reflect changes in business practices and financial reporting requirements.

  6. What is the difference between relevance and reliability in financial reporting according to the IASB's Framework? Answer: Relevance refers to information that is important for the stakeholders in making decisions, while reliability refers to information that is accurate and can be trusted.

  7. How does the IASB's Framework define a liability? Answer: A liability is defined as a present obligation of the entity as a result of past events, which is expected to result in an outflow of economic resources.

  8. Why is comparability important in financial reporting according to the IASB's Framework? Answer: Comparability is important because it allows stakeholders to compare the financial performance and position of different companies, which helps them make informed decisions.

  9. What is the difference between an expense and a loss in financial reporting according to the IASB's Framework? Answer: An expense is a decrease in economic resources as a result of the company's ongoing operations, while a loss is a decrease in economic resources that is not a result of the company's ongoing operations.

  10. How does the IASB's Framework define equity? Answer: Equity is defined as the residual interest in the assets of the entity after deducting liabilities.

The IASB's Framework provides a conceptual framework for the preparation and presentation of financial statements. It sets out the underlying concepts that should be applied when preparing financial statements that provide relevant, reliable, and comparable information to the stakeholders. The Framework is not a standard, but rather a guide that helps preparers of financial statements to understand the principles and concepts that underlie the preparation and presentation of financial statements. The Framework is composed of several elements, including the objective of financial reporting, qualitative characteristics of financial information, and elements of financial statements. The objective of financial reporting is to provide information that is useful for making economic decisions. The qualitative characteristics of financial information include relevance, reliability, comparability, and understandability. These characteristics help ensure that the information provided in financial statements is useful to stakeholders. The Framework also defines the elements of financial statements, which include assets, liabilities, equity, income, and expenses. Assets are defined as resources controlled by the entity that are expected to generate future economic benefits. Liabilities are defined as obligations of the entity that are expected to result in an outflow of economic resources. Equity is defined as the residual interest in the assets of the entity after deducting liabilities. Income is defined as increases in economic resources during the reporting period, while expenses are defined as decreases in economic resources during the reporting period. The Framework also emphasizes the importance of consistency in financial reporting. Consistency ensures that financial statements are comparable over time and across different companies, which helps stakeholders make informed decisions. In addition, the Framework requires that financial statements provide sufficient information to enable stakeholders to understand the financial position, performance, and cash flows of the entity. Overall, the IASB's Framework provides a conceptual framework that helps preparers of financial statements to understand the principles and concepts that underlie the preparation and presentation of financial statements. It helps ensure that financial statements provide relevant, reliable, and comparable information to the stakeholders, which is essential for making informed economic decisions.

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