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Chapter 2: Q2ISTQ (page 76)

Which of the following statements about the IASB and FASB conceptual frameworks is not correct?

(a) The IASB conceptual framework does not identify the element comprehensive income.

(b) The existing IASB and FASB conceptual frameworks are organized in similar ways.

(c) The FASB and IASB agree that the objective of financial reporting is to provide useful information to investors and creditors.

(d) IFRS does not allow use of fair value as a measurement basis.

Short Answer

Expert verified

The correct option is (d) IFRS does not allow the use of fair value as a measurement basis.

Step by step solution

01

Definition of Conceptual Framework

Conceptual frameworks can be defined as the fundamentals and the principles that must be followed to achieve the targeted objective of the financial reporting.

02

Explanation for correct options

Option (d) is correct because the IFRS allows the use of fair value for measurement basis. The fair value measurement basis is described under IFRS 13. IFRS 13 provides information about the fair value measurement and its disclosure.

03

Explanation for incorrect options

  1. This option is incorrect because the IASB conceptual framework does not identify the element of comprehensive income. Rather, it identifies the element changes in equity.
  2. This option is incorrect because the conceptual framework of both IASB and FASB are organized in similar ways to
  3. This option is incorrect because the IASB and FASB both believe that the financial statement's main users are prepared to provide useful information to them

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Most popular questions from this chapter

CA2-7 (Expense Recognition Principle) Accountants try to prepare income statements that are as accurate as possible. A basic requirement in preparing accurate income statements is to record costs and revenues properly. Proper recognition of costs and revenues requires that costs resulting from typical business operations be recognized in the period in which they expired.

Instructions

(a) List three criteria that can be used to determine whether such costs should appear as charges in the income statement for the current period

.(b) As generally presented in financial statements, the following items or procedures have been criticized as improperly recognizing costs. Briefly discuss each Item from the viewpoint of matching costs with revenues and suggest corrective or alternative means of presenting the financial information.

(1) Receiving and handling costs.

(2) Cash discounts on purchases.

Expenses, losses, and distributions to owners are all decreases in net assets. What are the distinctions among them?

Question: The AICPA Special Committee on Financial Reporting proposed the following constraints related to financial reporting.

  1. Business reporting should exclude information outside of management’s expertise or for which management is not the best source, such as information about competitors.

  2. Management should not be required to report information that would significantly harm the company’s competitive position.

  3. Management should not be required to provide forecasted financial statements. Rather, management should provide information that helps users forecast themselves the company’s financial future.

  4. Other than for financial statements, management need report only the information it knows. That is, management should be under no obligation to gather information it does not have, or does not need, to manage the business.

  5. Companies should present certain elements of business reporting only if users and management agree they should be reported- a concept of flexible reporting.

  6. Companies should not have to report forward-looking information unless there are effective deterrents to unwarranted litigation that discourages companies from doing so.

Instructions

For each item, briefly discuss how the proposed constraint addresses concerns about the costs and benefits of financial reporting.

Question: Which of the following statements about the IASB and FASB conceptual frameworks is not correct?

  1. The IASB conceptual framework does not identify the element comprehensive income.
  2. The existing IASB and FASB conceptual frameworks are organized in similar ways.
  3. The FASB and IASB agree that the objective of financial reporting is to provide useful information to investors and creditors.
  4. IFRS does not allow use of fair value as a measurement basis.

Do the IASB and FASB conceptual frameworks differ in terms of the role of financial reporting? Explain.

See all solutions

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