2.2What is the difference between a conceptual framework and accounting standards?

2.3Outline the technical benefits of a conceptual framework. What problems could occur if accounting standards were set without a conceptual framework?

2.14It is claimed by some that the reason for conceptual frameworks in accounting is to protect theaccounting profession rather than improve accounting practice. Explain the basis for this claim.

2.18Identify the characteristics of heritage assets. Would these characteristics preclude recognition as an asset, if applying the definition and recognition criteria in theConceptual Framework(orProposed Framework)?

2.24A company has a copper mine in South Africa. It purchased the mining rights ten years ago for $20 million and has been operating the mine for the past ten years. It is estimated that there are about 8 million tonnes of copper in the mine. Because of a fall in world copper prices, the company has closed the mine indefinitely. At current world copper prices, the mine is uneconomic because the costs involved in extracting the copper are greater than the selling price. As the mine is in a remote and unpopulated area there is no alternate use and it cannot be sold. If copper prices rise by more than 25%, the company has stated that the mine would be reopened. In the foreseeable future (next 10 years or so) it is estimated there is a 20% probability that copper prices will rise sufficiently for extraction to be profitable.

Explain whether this mine would meet the definition and recognition criteria of an asset, applying the principles in:

-theConceptual Framework

-theProposed Framework.

2.25The company is currently growing and it is expected that in five years an additional factory will need to be built to meet product demand at a cost of $500 000. The directors wish to recognise an expense of $100 000 and a liability (provision for future expansion) for each of the next five years.

Applying the principles in theConceptual FrameworkorProposed Framework, explain whether:

-the definition of a liability or expense is met

-the recognition criteria for a liability or expense are met.

2.27A public museum has an exhibition of 20 rare fossils. A number of these were purchased at a total cost of $750 000, while six items were donated to the museum. If sold (to other museums and collectors) it is estimated that the fossils would sell for around $1.5 million, although the donated items (which would sell for $600 000) were donated on the condition that they would not be sold and are to be returned to the donors if no longer required by the museum. The museum charges a nominal fee of $2 for entry to the exhibit and receives on average $30 000 per annum in fees. It is estimated that it costs around $70 000 per annum to maintain the exhibition.

Applying the definition and recognition criteria for assets, explain whether the fossils could be recognised as assets of the museum.