Financial Reporting And Analysis - Financial Reporting And Analysis Section 1

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6. According to the IFRS framework, the qualitative characteristic that makes financial information useful is least likely to be:

  • Option : B
  • Explanation : The four principal qualitative characteristics that make financial information useful are understandability, relevance, reliability and comparability. Materiality relates to the level of detail of the information needed to achieve relevance – whether the omission or misstatement of the information would impact the decision maker's decision.
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7. According to the IASB’s Conceptual Framework for Financial reporting, the two fundamental qualitative characteristics that make financial information useful are best described as:

  • Option : A
  • Explanation : Relevance and faithful representation are the two fundamental qualitative characteristics that make financial information useful, according to the IASB Conceptual Framework.
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8. Under the IFRS Framework for the Preparation and Presentation of Financial Statements, to be recognized as a financial statement element, an element most likely needs to:

  • Option : A
  • Explanation : For recognition in the financial statements, an element must have a cost or value that can be measured with reliability; certainty is not a requirement for economic benefits associated with an item to flow to or from the enterprise: all that is required is that it is probable that they will.
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9. According to the IASB Conceptual Framework, the two fundamental qualitative characteristics that make financial information useful are best described as:

  • Option : B
  • Explanation : Relevance and faithful representation are the two fundamental qualitative characteristics that make financial information useful according to the IASB Conceptual Framework.
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10. The Conceptual Framework (2010) identifies several characteristics that enhance the usefulness of financial information. Which of the following is least likely a characteristic?

  • Option : A
  • Explanation : Transparency is not one of the characteristics. The characteristics are relevance, faithful presentation, comparability, timeliness, understandability and verifiability.
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