ExpertEasy2 marksMultiple Choice
ACCA · Question 01 · The Conceptual Framework
Section A
GlobalHealth NGO recently changed its accounting policy for valuing medical inventory from FIFO to Weighted Average to better align with its international donor reporting requirements. According to the IASB Conceptual Framework, which qualitative characteristic is primarily enhanced by this change if it allows donors to evaluate the NGO alongside similar global entities?
Section A
GlobalHealth NGO recently changed its accounting policy for valuing medical inventory from FIFO to Weighted Average to better align with its international donor reporting requirements. According to the IASB Conceptual Framework, which qualitative characteristic is primarily enhanced by this change if it allows donors to evaluate the NGO alongside similar global entities?
Answer options:
A.
Faithful representation
B.
Comparability
C.
Verifiability
D.
Timeliness
How to approach this question
Recall the enhancing qualitative characteristics from the Conceptual Framework. When the goal is to evaluate an entity alongside 'similar global entities', the characteristic being applied is Comparability.
Full Answer
B.Comparability✓ Correct
The Conceptual Framework identifies comparability, verifiability, timeliness, and understandability as enhancing qualitative characteristics. Comparability specifically allows users to compare the financial statements of different entities to evaluate their relative financial position, performance, and changes in financial position.
Common mistakes
Students often confuse relevance (a fundamental characteristic) with comparability (an enhancing characteristic).
Practice the full ACCA FR — Financial Reporting Practice Exam 2
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