Question

ES Exercise 2-2 Your answer is partially correct. Try again. The conceptual framework identifies the fundamental and enhancing qualitative characteristics that make accounting information useful Answer the following questions related to these qualitative characteristics. (a) Which quality of financial information makes it possible for users to confirm or correct prior expectations? (b) The U.S. Securities and Exchange Commission chairman once noted that if it becomes accepted or expected that accounting principles are determined or modified in order to achieve goals that do not involve economic measurement, we risk a serious loss in confidence in the credibility of our financal information system. Which qualitative characteristic of accounting information should ensure that this situation will not occur? (c) Milner Corp. chooses to account for a transaction based simply on its legal form. Is this acceptable? (d) Companies in the mining industry defer losses on their properties because recognizing such losses immediately could have adverse economic consequences for the industry. Which qualitative characteristic of accounting information is not followed? (e) Only Once Ltd. provides overly complicated descriptions and explanations in its statement notes and provides only aggregated totals on the face of its financial statements. Which qualitative characteristic of accounting information is not followed? (1) Baskins does not issue its first-quarter report until after the second quarter's results are reported. Which qualitative characteristic of accounting information is not followed? (9) Predictive value is an ingredient of which qualitative characteristic of useful information (h) Vittorio Inc. is the only company in its industry to deprecate its plant assets on a straight line basis. Which qualitative characteristic is not present? (1) Green Gable Corp, has tried to determine the replacement cost of its inventory. Three different appraisers arrive at substantially different amounts for this value. The president then decides to use the middle aloe for external reports, which qualitative charactenstic of information is lacking in these data? (1) The controller at Owens Inc. noticed that a matenal transaction was not included in the year and financial results, which qualitative charactenstic is not present?

Answer 1

(a) Relevance

(b) Reliable

(c) No, Substance over legal form is an accounting concept which means that the economic substance of transactions and events must be recorded in the financial statements rather than just their legal form in order to present a true and fair view of the affairs of the entity.

(d) Timeliness

(e) Understandability

(f) Timeliness

(g) Relevance

(h) Neutrality

(i) Neutrality

(j) Comparibility