CONCEPTUAL AND REGULATORY FRAMEWORK

QUESTION 1 - June 2011 Your assistant has been reading the IASB's Framework for the preparation and presentation of financial statements (Framework) and as part of the qualitative characteristics of financial statements under the heading of 'relevance' he notes that the predictive value of information is considered important. He is aware that financial statements are prepared historically (i.e. after transactions have occurred) and offers the view that the predictive value of financial statements would be enhanced if forward-looking information (e.g. forecasts) were published rather than backward-looking historical statements.

Required: By the use of specific examples, provide an explanation to your assistant of how IFRS (International Financial reporting Standard) presentation and disclosure requirements can assist the predictive role of historically prepared financial statements. (6 marks)

QUESTION 2 - December 2012

Two of the qualitative characteristics of information contained in the IASB's (International Accounting Standard Board) Conceptual Framework for Financial Reporting are understand-ability and comparability.

Required: Explain the meaning and purpose of the above characteristics in the context of financial reporting and discuss the role of consistency within the characteristic of comparability in relation to changes in accounting policy. (6 marks)