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Acctg 331 - Exam1
Qualitative Characteristics
| Question | Answer |
|---|---|
| Relevance | info is helpful to current decision (related) |
| Predictive Value | helps us forecast & predict |
| Confirmatory Value | confirms or contradicts belief |
| Materiality | is dollar amount large enough to be impactful, is the size and type of item relevant to company |
| Comparability | compare across companies |
| Consistency | one company compared with itself, is consistent with what info is used and how |
| Verifiability | same result each time |
| Faithful Representation | tells story of reality |
| Completeness | complete set of info, everything included |
| Neutrality | no bias |
| Free from Error | Reliable, no mistakes |
| Timeliness | info delivered on time |
| Understandability | Clear info |
| Cost Effectiveness | benefits exceed costs, biggest constraint |
| ______ means that info has predictive value and/or confirmatory value, typically both | relevance |
| Current-period net income has ____ if it helps users predict a company's future cash flows, and it has ___ if it helps investors confirm or change their prior assessments regarding a company's cash-flow generating ability | predictive value, confirmatory value |
| Financial info is _____ if omitting it or misstating it could affect users' decisions. | material |
| The threshold for ____ has been left to the subjective judgment of the company preparing the financial statements and its auditors | materiality |
| A financial accounting standard, and the standard-setting process, is ____ if it is free from bias. In other words, it should try to not be intended to achieve particular social outcomes or favor particular groups or companies. | neutral |
| If there are no mistakes or omissions in the description of the amount or the process used to report the amount, the info. is ___ | free from error |
| ____ helps users see similarities and differences between events and conditions (and across multiple companies) | comparability |
| ___ refers to the same accounting practices being used over time to permit valid comparisons between reporting periods | consistency |
| ____ implies that different knowledgeable and independent measurers would reach consensus regarding whether info is a faithful representation of what it is intended to depict | verifiability |
| ___ indicates that info is available to users early enough to allow them to use it in their decision process | timeliness |
| ___ means that users can comprehend the info within the context of the decision being made | understandability |
| Underlying the framework is a _____ constraint. The benefits of providing info must outweigh the cost | cost effectiveness |
| ____ provide a mechanism to help the economy allocate resources more effectively | capital markets (investors and creditors) |
| 3 key variables in investment decision | uncertainty, risk, Rate of Return |
| what allows companies to be able to *compare* financial statements? (rules for reporting info) | GAAP |
| FASB had how many full-time members? (U.S. accounting standards) | 7 |
| what identifies financial reporting issues and attempts to resolve them without the FASB? | EITF |
| Global accounting standards | IASC |
| IASC issued new standards of its own ____ | IFRS |
| Role of an auditor is to... | ... express an opinion on the compliance of financial statements with GAAP |
| ___ deals with distinguishing right from wrong | ethics |
| The Conceptual Framework... | ... provides an underlying foundation for U.S. accounting standards (SFACs in GAAP) |
| Objective of Conceptual Framework | to provide financial info that is useful to capital providers in making decisions |
| ____ assumption presumes that economic events can be identified specifically with an economic enity | economic entity |
| ____ assumption anticipates that a business entity will continue to operate indefinitely | going-concern |
| ___ assumption allows the life of a company to be divided into artificial time periods to provide timely info | periodicity |
| ___ used in U.S. financial statements is the U.S. dollar | monetary unit |
| Historical Cost Principle | record assets at their original cost (adjusted for depreciation and amortization), do not update based on fair market value |
| Full Disclosure Principle | requires that the financial reports should include any info that could affect the decisions made by external users |
Created by:
lexi.welte
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