Question 1 Conceptual Framework The following extract is taken from the article "A tale of prudence" by Steve Cooper, which you were required to read as part of the course. It may seem obvious that prudence is a desirable thing when preparing financial information; after all, would you wish for imprudent accounting? However, establishing the characteristics of useful financial reporting has long proved difficult and controversial. Until 2010, prudence was included in the International Accounting Standards Board's (ASB) Conceptual Framework. In the 2010 revision we removed the reference to prudence, but we are now proposing to put prudence back. So why is the IASB seemingly so indecisive? And why should investors care? Required Briefly outline the following: i) how prudence is defined in the IASB conceptual framework (2 marks) ii) how faithful representation is defined in the IASB conceptual framework (4 marks) iii) an example stated in the full article, supporting conservatism in accounting (3 marks) iv) why the IASB removed prudence from the conceptual framework (2 marks) V) why investors may support the re-inclusion of prudence in the conceptual framework (4 marks) Question 1 Conceptual Framework The following extract is taken from the article "A tale of prudence" by Steve Cooper, which you were required to read as part of the course. It may seem obvious that prudence is a desirable thing when preparing financial information; after all, would you wish for imprudent accounting? However, establishing the characteristics of useful financial reporting has long proved difficult and controversial. Until 2010, prudence was included in the International Accounting Standards Board's (ASB) Conceptual Framework. In the 2010 revision we removed the reference to prudence, but we are now proposing to put prudence back. So why is the IASB seemingly so indecisive? And why should investors care? Required Briefly outline the following: i) how prudence is defined in the IASB conceptual framework (2 marks) ii) how faithful representation is defined in the IASB conceptual framework (4 marks) iii) an example stated in the full article, supporting conservatism in accounting (3 marks) iv) why the IASB removed prudence from the conceptual framework (2 marks) V) why investors may support the re-inclusion of prudence in the conceptual framework (4 marks)