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Chapter 1 CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING Discussion Question 17
Correct Incorrect, no particular presentation requirements are discussed in the Framework. Correct Incorrect, understandability is not an excuse to omit complex information in the financial statements. Users are expected expected to possess basic business knowledge and to exercise diligence. Correct Correct Incorrect, expenses do not involve transactions with owners. Incorrect, an entity shall not leave its accounting policy unchanged if management assesses that another method of accounting will more relevantly and reliably present enterprise performance and financial position. Incorrect, understandability depends on two factors: the quality of the information and the characteristics of the users. Incorrect, an information loses its relevance if it is not communicated early enough for decision making needs of the users. Correct Incorrect, there is no standard form for the presentation of financial statements; the management prepares the financial statements using form that will best communicate to users the enterprise’s financial position, performance and other changes in financial position. Incorrect, the main objective of consistency is to present actual similarities and differences between reporting periods and between enterprises, and not to smooth profit. Incorrect, the financial capital concept does not limit the measurement basis of financial statement elements to only one type. Correct
Fair value (current cost) Present value Historical cost and net realizable value Historical cost and current cost Historical cost and current cost Current cost Current cost Present value Historical cost and current cost Historical cost and net realizable value Present value Present value Combination of historical cost, current cost, present value and realizable value Historical cost Present value
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