Question 4MCQ - Intermediate Accounting (Kieso)

Question

The authoritative status of the conceptual framework is as follows. (a) It is used when there is no standard or interpretation related to the reporting issues under consideration. (b) It is not as authoritative as a standard but takes precedence over any interpretation related to the reporting issue. (c) It takes precedence over all other authoritative literature. (d) It has no authoritative status.

Step-by-Step Solution

Answer

The correct option is (a).

Meaning of the Conceptual Framework

The Conceptual Framework determines the concepts of financial reporting. This ensures that there is conceptual consistency between the standards and the resulting information is useful to the users of the accounting information.

Explanation for the correct option

The primary purpose of the Conceptual Framework was to assist the IASB in the development of future IFRSs and in its review of existing IFRSs. The Conceptual Framework may also assist preparers of financial statements in understanding the accounting standards.

The authoritative status of the Conceptual Framework for financial reporting is that it is used when there is no standard or interpretation related to the reporting issues under consideration.

 

This is by definition what The Conceptual Framework was created for, therefore the correct answer is (a)