Question

Pervasive constraints are defined by

A. The consistency in the application of methods over time
B. What influences or makes a difference to a decision maker
C. Quantitative criteria set by the Financial Accounting Standards Board
D. The amount of the benefits received exceed the costs associate with it

The FASB Conceptual Framework for Financial Reporting provide a foundation of qualitative characteristics of useful information. These qualities include

• 
  A.

  Fundamental Qualities

  Enhancing Qualities

• B.

  Conservatism Qualities

  Stewardship Qualities

• C.

  Enhancing Qualities

  Financial Reporting Qualities

• D.

  Agency Qualities

  Reliability Qualities

Answer 1

Ans:

(a) The correct answer is (D) The amount of the benefits received exceed the costs associate with it.

The pervasive constraint is that the benefits of information should exceed its cost. Information that would be useful for a decision may be just too expensive to justify providing it.

(b) The correct answer is (A) Fundamental Qualities Enhancing Activities.

The Conceptual Framework identifies comparability, verifiability, timeliness, and understandability as the four enhancing qualitative characteristics: Comparability permits the identification and understanding of similarities and differences between items of information.