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1)Is it that GAAP is included in the conceptual framework to harmonise all aspects of financial reporting for different countries?
2)Is it that because the conceptual framework is based on theoretical principles that it protects it from political pressure?
3)How do investors have information on the level of dividends in the future and any changes in share prices?
4)What impact does the conceptual framework have on standards, particularly the definition?Does it make it consistent for all countries internationallyHi,
Good to see you trying to learn about the Framework in a deeper manner.
1) The Framework applies specifically to International Accounting Standards but you will find similar frameworks that underpin accounting standards in other jurisdictions. The aim of The Framework is to ensure that IASs/IFRSs are developed using the same principles, hence consistency in their interpretation and application.
2) The Framework is based upon principles and not rules, and this therefore allows for judgement in applying the IASs/IFRSs.
3) Listed companies will publish dividend policies either in their annual report or on their website, whether that be a dividend that grows annually, or is a proportion of profits. It is not possible to predict any changes in share price.
4) Yes, similar to the answer above, in using The Framework as a foundation stone for preparing the IASs/IFRSs, i.e. applying the definitions of the elements and recognition criteria, then the standards are consistent and therefore we will achieve a fair presentation of the results.
Thanks
Hi sir,
I am having difficulty in answering some questions kindly explain them to meWhich of the following should be recognized as an asset in the SFP of a company(BPP kit Question 7 valid till June 2018)
A.a skilled and experienced workforce which has been very expensive to train.Some of these staff are still in the employment of the company.
B A highly lucrative contract signed during the year which is due to commence shortly after the year end.
C a government grant relating to the purchase of an item of plant several years ago,which has remaining life of 4 years
D A receivable from a customer which has been sold(factored) to a finance company.The finance company has full recourse to the company for any losses.Dear sir,
Can you kindly explain to me this statement it is part of a MCQ question from BPP Lisbon
1)Sold an asset to a finance company and leased it back for the remainder of it’s useful life.The accountant has decided that this should be treated as a secured loan.So l don’t understand how it is a loan,and the question reads which concept or qualitative characteristic has influenced the decision above
A faithful representation
BVerifiability
C Accruals
D ComparabilityThanks
Jagmeet@jagmeet said:
Hi sir,
I am having difficulty in answering some questions kindly explain them to meWhich of the following should be recognized as an asset in the SFP of a company(BPP kit Question 7 valid till June 2018)
A.a skilled and experienced workforce which has been very expensive to train.Some of these staff are still in the employment of the company.
B A highly lucrative contract signed during the year which is due to commence shortly after the year end.
C a government grant relating to the purchase of an item of plant several years ago,which has remaining life of 4 years
D A receivable from a customer which has been sold(factored) to a finance company.The finance company has full recourse to the company for any losses.Hi,
Instead of me going through the entire question I think it is better for you to answer it and justifying your answer, then I can state where you are right or wrong. It is better for your learning and understanding to do it this way.
Thanks
@jagmeet said:
Dear sir,
Can you kindly explain to me this statement it is part of a MCQ question from BPP Lisbon
1)Sold an asset to a finance company and leased it back for the remainder of it’s useful life.The accountant has decided that this should be treated as a secured loan.So l don’t understand how it is a loan,and the question reads which concept or qualitative characteristic has influenced the decision above
A faithful representation
BVerifiability
C Accruals
D ComparabilityThanks
JagmeetHi,
Even though legally it has been sold it sounds like that in substance the asset is ours and so we continue to recognise it on our SFP and the sale proceeds recognised as a loan (DR Bank CR Loan).
Given this which then of the answers do you think it is? If you can’t get the answer directly, then try a process of elimination crossing out the answers that you know it isn’t. Let me know how you get on and I can explain again where you’ve gone right or wrong.
Thanks
Good morning sir,
In the first question,the contract is a resource controlled by the entity,the entity has some control because it is a party to the contract and in the recognition criteria it is likely that the contract will embody in flow of economic benefit and and a reliable estimate can be made(one of the elements of a contract is that there should be consideration)In the second question is it because we are recognising the asset as ours so we take it as a loan so l am thinking Accruals cause we are not paying regard to the receipt of cash cause we recognise it as a loan
@jagmeet said:
Good morning sir,
In the first question,the contract is a resource controlled by the entity,the entity has some control because it is a party to the contract and in the recognition criteria it is likely that the contract will embody in flow of economic benefit and and a reliable estimate can be made(one of the elements of a contract is that there should be consideration)Hi,
Your in the right area with regards to the definition of an asset and therefore the answer would be the factored receivable with full recourse. As the factor can come back to us for any unclaimed amounts we therefore still have control of the asset.
It cannot be the workforce as we do not control them, whilst it cannot be the contract as we only record the revenue received from the contract and not the contract itself. The grant is not an asset but a liability as it would be recognised as deferred income.
Thanks
@jagmeet said:
In the second question is it because we are recognising the asset as ours so we take it as a loan so l am thinking Accruals cause we are not paying regard to the receipt of cash cause we recognise it as a loanHi,
You’re nearly there with your understanding with regards to the treatment but substance is a subsection of faithful representation. So the answer would be A.
Accruals/matching would be an example recognising the interest element on the loan itself.
Thanks
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