ACCA FR Conceptual Framework: practice questions with answers

Question 1

Which of the following is a fundamental qualitative characteristic of useful financial information according to the IASB's Conceptual Framework for Financial Reporting?

1. A Relevance
2. B Comparability
3. C Verifiability
4. D Timeliness

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Answer: A. The two fundamental qualitative characteristics are relevance and faithful representation. Comparability, verifiability, timeliness and understandability are enhancing characteristics.

Question 2

Which measurement basis is described as 'the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date'?

1. A Value in use
2. B Historical cost
3. C Current cost
4. D Fair value

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Answer: D. This is the IFRS 13 definition of fair value, which the Conceptual Framework also adopts as one of its current value measurement bases.

Question 3

According to the IASB's Conceptual Framework, what is the underlying assumption on which financial statements are normally prepared?

1. A Accruals
2. B Prudence
3. C Going concern
4. D Consistency

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Answer: C. The Conceptual Framework names going concern as the underlying assumption: the entity is expected to continue operating for the foreseeable future.

Question 4

Which of the following statements about the standard-setting process (due process) of the International Accounting Standards Board (IASB) is correct?

1. A An exposure draft is published for public comment before a new IFRS Accounting Standard is issued.
2. B A discussion paper must be published and commented on before every exposure draft.
3. C A new IFRS Accounting Standard is issued only after the International Organization of Securities Commissions (IOSCO) has approved it.
4. D New IFRS Accounting Standards are approved by a vote of the IFRS Interpretations Committee before they are issued.

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Answer: A. The IASB's due process typically runs: research and agenda decision, a discussion paper (optional, used for major projects), an exposure draft (mandatory, published for public comment), redeliberation of the comments received, then a vote by the IASB board to issue the final IFRS Accounting Standard, followed by post-implementation review. Neither IOSCO nor the Interpretations Committee approves standards; national adoption and enforcement are matters for each jurisdiction.