Question

Week 1 The fundamental qualitative characteristics that financial information must possess to be useful to the primary users of general purpose financial reports—identified in the Conceptual Framework are ‘relevance’ and ‘faithful representation’. Required: a) Provide one example where information is relevant but not faithfully represented. (3 marks, maximum 100 words) b) Provide one example where information is not relevant but is faithfully represented. (3 marks, maximum 100 words) c) Provide one example where information is relevant and faithfully represented. (4 marks, maximum 150 words) please provide harward referencing and make according to word limit

Week 2 a) What is a social contract and how does it relate to organisational legitimacy? (6 marks, maximum 300 words) b) Explain two ways organisations can use corporate disclosure policy to maintain or regain organisational legitimacy? (4 marks, maximum 200 words) please provide harward referencing and make according to word limit

Answer 1

The fundamental qualitative characteristics that financial information must possess to be useful to the primary users of general purpose financial reports—identified in the Conceptual Framework are ‘relevance’ and ‘faithful representation’.

a)  One example where information is relevant but not faithfully represented: A case wherein information regarding a ongoing tax law suit which is likely to go against the entity and lead to a huge cash outflow in the form of penalties in the near future which may be the next financial year is not disclosed in the financials in the form of a note is an instance of information being relevant to the primary users of general purpose financial reports but is not faithfully represented.

b) One example where information is not relevant but is faithfully represented: Disclosure of a customer's default of $10 may not be relevant for the users of financial statements of a company with net worth $10 million but has been faithfully represented.

c) Provide one example where information is relevant and faithfully represented: Provision for a debt w.r.t. to customer who is most likely make default in near future is relevant to the users of financial statements showing true value of current assets and is faithfully represented.