Question

Q1

What is the objective purpose of general-purpose financial reporting?

Q2

Users of financial statements can face different questions about the recognition and measurement of financial items. To help develop the type of financial information that can be used to answer these questions financial accounting and reporting rules are based on a conceptual framework.

Requirements:

1.   What are the basic components of the Conceptual Framework?

2.   What are your views about the success of the conceptual framework?

Answer 1

Ans 1

The objective of financial statements is to provide information about the

financial position,

financial performance and

cash flows of an entity that is useful to a wide range of users in making economic decisions.

These users include existing and potential investors, lenders and other creditors.

Users of financial statements make economic decisions based on their evaluation of the ability of the entity to generate cash and cash equivalents and of the timing and certainty of their generation.

The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity (e.g. providing loans to the entity or buying equity instruments of the entity) (OB2).

Ans -3

Ans - (A)

The Basic components of the framework is the -

the objective of general purpose financial reporting qualitative

• characteristics of useful financial information
• financial statements and the reporting entity
• the elements of financial statements
• recognition and derecognition measurement
• presentation and disclosure

concepts of capital and capital maintenance

Ans B

. In general, the success of the conceptual framework will be determined by its acceptance in practice. The acceptance in practice will be based in large part upon the FASB's solution of practical problems on a timely basis.

It is a matter of opinion and yet to be seen whether or not the conceptual framework will bring about the following benefits.

a. The FASB should be able to issue more useful and consistent standards in the future.

b. New practice problems should be solved more rapidly by reference to an existing framework.

c. Better understanding of and confidence in the financial reporting process by financial statement users should result.

d. Enhanced comparability among companies' financial statements should