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Chapter 2: Question 6Q (page 61)

What are the enhancing qualities of the qualitative characteristics? What is the role of enhancing qualities in the conceptual framework?

Short Answer

Expert verified

Enhancing qualitative characteristics include:

  • Providing timely information.
  • Providing information that is easily understandable.
  • Information provided is verifiable.
  • Available information is comparable in nature.

The role of enhancing qualities is it separates the more-useful information from the less-useful information.

Step by step solution

01

Enhancing qualities of the qualitative characteristics

There are four enhancing qualitative characteristics as follows:

  • Timeliness: The term timeliness means the presentation of the accounting information to its users on a regular basis so as to aid them in taking decisions.
  • Understandability: Understandability denotes the method by which the financial information must be displayed in a way that is easily understandable by the reader.
  • Verifiability: The term verifiability comprises that the information must be displayed in a way that it is verifiable by the independent accountants.
  • Comparability: It indicates the qualitative characteristics that help users in recognizing and understanding the similarities and distinctions among items.
02

Role of enhancing qualities in the conceptual framework 

Enhancing qualities are characteristics that are beneficial for the management and the investors for using the financial statements of the company in their decision-making process.

Thus, these qualities in a conceptual framework enhance the organization's fundamental characteristics. Moreover, these characteristics also provide extra benefit and usefulness in financial reporting information.

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Most popular questions from this chapter

Explain how you would decide whether to record each of the following expenditures as an asset or an expense. Assume all items are material.

a) Legal fees paid in connection with the purchase of land are \(1,500.

b) Eduardo, Inc. paves the driveway leading to the office building at a cost of \)21,000.

c) A meat market purchases a meat-grinding machine at a cost of \(3,500.

d) On June 30, Monroe and Meno, medical doctors, pay 6 months' office rent to cover the month of July and the next 5 months.

e) Smith's Hardware Company pays \)9,000 in wages to laborers for construction on a building to be used in the business.

f) Alvarez's Florists pays wages of $2,100 for the month an employee who serves as driver of their delivery truck.

Describe the basic assumptions of accounting.

What is the primary objective of financial reporting?

Question: BE2-5 (L03) Presented below are three different transactions related to materiality. Explain whether you would classify these transactions as material.(

a) Blair Co. has reported a positive trend in earnings over the last 3 years. In the current year, it reduces its bad debt allowance to ensure another positive earnings year. The impact of this adjustment is equal to 3% of net income.

(b) Hindi Co. has an unusual gain of \(3.1 million on the sale of plant assets and a \)3.3 million loss on the sale of investments. It decides to net the gain and loss because the net effect is considered immaterial. Hindi Co.'s income for the current year was \(10 million.

(c) Damon Co. expenses all capital equipment under \)25,000 on the basis that it is immaterial. The company has followed this practice for a number of years.

Question: What are some of the differences in elements in the IASB and FASB conceptual frameworks?
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