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3. The International Financial Reporting Standards Framework

c. describe the International Accounting Standards Board’s conceptual framework, including qualitative characteristics of financial reports, constraints on financial reports, and required reporting elements;

What is the US equivalent of IFRS? US GAAP

What is IFRS stand for? International Financial Reporting Standards

What three items are set forth in the IFRS Framework? 1. the concepts that underlie the preparation and presentation of financial statements for external end-users 2. provides further guidance on the elements from which financial statements are constructed 3. discusses the concepts of capital and capital maintenance

When is financial information considered relevant? Financial information is relevant if it has the capacity to influence an end-user’s economic decisions. Relevant information will help users evaluate the past, present, and most importantly, future events in a company.

When is financial information considered reliable? To be reliable, financial information must represent faithfully the effects of the transactions and events that it reflects. The true impact of transactions and events can be compromised by the difficulty of measuring transactions reliably.

What does the ISRS framework consider the five elements of financial statements? 1. Assets 2. Liability 3. Equity 4. Revenues 5. Expenses

What are the three inherent constraints of financial statements? 1. Timeliness - To be relevant, information must be timely; however, it takes time to get reliable information. How to balance between relevance and reliability? 2. Benefit vs cost - Does the cost of providing financial information exceed the benefits derived from the information? 3. Balance between qualitative characteristics