Conceptual Framework Quiz Questions And Answers
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Here is an interesting conceptual framework quiz that is designed to test your knowledge of this subject. The conceptual framework can be described as a written or visual representation of an expected relationship between variables. If you think you know this topic really well, then you must take this quiz and see how well you can score. So, are you ready to take this quiz? Let's begin then. Wishing you good luck.
- 1.The purpose of the Conceptual Framework is:
- A.
To assist the International Accounting Standards Board to develop IFRS Standards.
- B.
To assist preparers of IFRS financial statements to develop consistent accounting policies when no IFRS Standard applies to a particular transaction or other event, or when a Standard allows a choice of accounting policy.
- C.
To assist all parties to understand and interpret IFRS Standards.
- D.
All of the above
- 2.The Conceptual Framework can override requirements in a Standard.
- A.
True
- B.
False
- 3.Revision of the Conceptual Framework will automatically lead to changes in Standards that are inconsistent with the revised concepts.
- A.
True
- B.
False
- 4.When developing requirements for IFRS Standards, can the International Accounting Standards Board depart from the Conceptual Framework?
- A.
No
- B.
Yes, the Board is not required to use the Conceptual Framework when developing Standards
- C.
Yes, but only from aspects of the Conceptual Framework and only if doing so is needed to meet the objective of financial reporting
- 5.If an IFRS Standard sets out requirements that are inconsistent with the Conceptual Framework, preparers have to apply the Conceptual Framework for affected transactions.
- A.
True
- B.
False
- 6.Entities have to apply the revised Conceptual Framework:
- A.
Immediately after it is issued
- B.
For annual reporting periods beginning on or after 1 January 2020, with early application permitted.
- C.
Never - the Conceptual Framework is only used by the International Accounting Standards Board
- 7.The objective of general purpose financial reporting as described in the Conceptual Framework is to:
- A.
Provide information to regulators
- B.
Support the entity's tax return
- C.
Meet the information needs of an entity's stakeholders.
- D.
Provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity.
- 8.Which of the following does the Conceptual Framework identify as the primary users of general purpose financial reports?
- A.
Employees, investors and trade union representatives
- B.
Existing and potential investors, lenders and other creditors
- C.
Lenders and other creditors and customers
- D.
Existing and potential investors, government agencies and the general public
- 9.Information needed to assess management's stewardship is always different from information needed to assess the prospects for future net cash inflows to the entity.
- A.
True
- B.
False
- 10.How does the Conceptual Framework explain the role of stewardship?
- A.
Providing information needed to assess management's stewardship is identified as an additional objective of financial reporting, equal in prominence to providing financial information useful to users in making decisions relating to providing resources to the entity
- B.
Decisions relating to providing resources to the entity depend on users' assessment of the amount, timing and uncertainty of the prospects for future net cash inflows to the entity and on their assessment of management's stewardship
- C.
Providing information needed to assess stewardship is more important than providing information needed to assess the prospects for future cash inflows to the entity
- D.
Financial reports are not intended to provide information needed to assess stewardship
- 11.The fundamental qualitative characteristics of useful financial information are:
- A.
Comparability and relevance
- B.
Relevance and reliability
- C.
Relevance, reliability and comparability
- D.
Relevance and faithful representation
- E.
Comparability, relevance and faithful representation
- 12.For information to be relevant, it has to possess:
- A.
Only predictive value
- B.
Only confirmative value
- C.
Both predictive and confirmatory value
- D.
Either predictive or confirmatory value, or both
- 13.A trade-off between the fundamental qualitative characteristics of relevance and faithful representation may need to be made in order to meet the objective of financial reporting.
- A.
True
- B.
False
- 14.Consolidated financial statements provide information about the assets, liabilities, equity, income and expenses of both the parent and its subsidiaries as:
- A.
Separate reporting entities
- B.
A partnership
- C.
A single reporting entity
- D.
A legal entity
- 15.When a reporting entity is not a legal entity and does not comprise only legal entities all linked by a parent-subsidiary relationship, the boundary of the reporting entity can contain an incomplete set of economic activities if that entity provides a description of how the boundary was determined.
- A.
True
- B.
False
- 16.The Conceptual Framework defines a liability as:
- A.
A present obligation of the entity to transfer an economic resource as a result of past events
- B.
A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodyiong economic benefits
- C.
An amount the entity may have to pay after the end of the reporting period
- D.
None of the above
- 17.For a right to meet the definition of an asset, it needs to be likely that the right will produce economic benefits for the entity.
- A.
True
- B.
False
- 18.In explaining the meaning of the term ‘obligation’ in the definition of a liability, the Conceptual Framework states:
- A.
That an obligation is a duty or responsibility that an entity has no practical ability to avoid
- B.
That an obligation can arise from a duty or responsibility conditional on a future action that the entity itself may take, if the entity has no practical ability to avoid taking that action
- C.
That an obligation can arise from an entity’s customary practices, published policies or specific statements, if the entity has no practical ability to avoid those practices, policies or statements
- D.
All of the above
- E.
None of the above
- 19.The residual interest in the assets of an entity after deducting all its liabilities is:
- A.
Income
- B.
Profit or loss
- C.
Equity
- D.
Other comprehensive income
- 20.Recognition is the process of:
- A.
Capturing, for inclusion in the statement of financial position or the statement(s) of financial performance, an item that meets the definition of one of the elements of the financial statements—an asset, a liability, equity, income or expenses
- B.
Determining where an item should be presented in the financial statements
- C.
Sorting assets, liabilities, equity, income or expenses on the basis of shared characteristics
- D.
Adding together of assets, liabilities, equity, income or expenses that have shared characteristics
- 21.Some items that do NOT meet the definition of an asset, a liability or equity may be recognised in the statement of financial position.
- A.
True
- B.
False
- 22.Which factors may indicate that recognition of an item meeting the definition of an asset or a liability may not provide relevant information?
- A.
Uncertainty about whether an asset or liability exists
- B.
Low probability of an inflow or outflow of economic benefits
- C.
Other factors
- D.
All of the above
- E.
None of the above
- 23.What does the Conceptual Framework state about derecognition?
- A.
For an asset, derecognition normally occurs when the entity loses control of all or part of the recognised asset
- B.
For a liability, derecognition normally occurs when the entity no longer has a present obligation for all or part of the recognised liability
- C.
Derecognition is the removal of all or part of a recognised asset or liability from an entity's statement of financial position
- D.
All of the above
- 24.Financial reports need to provide information useful in making decisions relating to providing resources to the entity. Those decisions include decisions about exercising rights to vote on, or otherwise influence, management’s actions that affect the use of the entity’s economic resources.
- A.
True
- B.
False
- 25.The Conceptual Framework describes prudence as:
- A.
The exercise of caution when making judgements under conditions of uncertainty
- B.
A bias towards understating assets or income and towards overstating liabilities or expenses
- C.
A preference towards the earlier recognition of expenses and liabilities than of income and assets
- D.
A mechanism for smoothing profits over time (understate profits in good years and overstate profits in bad years)
- E.
A form of accounting conservatism
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