ExpertEasy2 marksMultiple Choice
ACCA · Question 01 · The Conceptual and Regulatory Framework
SECTION A
Nexus Innovations, a tech startup, is preparing its first set of financial statements under IFRS. The CFO is deciding whether to present expenses by nature or by function. According to the IASB's Conceptual Framework for Financial Reporting, which qualitative characteristic is PRIMARILY being applied when management selects the presentation method that provides the most useful information to users?
SECTION A
Nexus Innovations, a tech startup, is preparing its first set of financial statements under IFRS. The CFO is deciding whether to present expenses by nature or by function. According to the IASB's Conceptual Framework for Financial Reporting, which qualitative characteristic is PRIMARILY being applied when management selects the presentation method that provides the most useful information to users?
Answer options:
A.
Comparability
B.
Relevance
C.
Verifiability
D.
Understandability
How to approach this question
Recall the fundamental vs. enhancing qualitative characteristics in the Conceptual Framework. Relevance and Faithful Representation are fundamental.
Full Answer
B.Relevance✓ Correct
According to the Conceptual Framework, the fundamental qualitative characteristics are relevance and faithful representation. Management must select the presentation (nature vs function) that provides the most relevant information to users regarding the entity's financial performance.
Common mistakes
Students often confuse enhancing characteristics (like comparability and understandability) with fundamental ones.
Practice the full ACCA FR — Financial Reporting Practice Exam 3
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