CMA Intermediate · Corporate Accounting and Auditing · Conceptual Framework
According to the Conceptual Framework, which factor determines the accounting model used in preparing financial statements?
The accounting model is determined by the choice of measurement bases combined with the concept of capital maintenance adopted. Neither entity size, auditor preference nor tax rules are named by the Framework as determining the model.
- AOnly the size of the reporting entity
- BThe selection of measurement bases together with the concept of capital maintenanceCorrect
- CThe preference of the statutory auditor
- DThe tax rules applicable to the entity
Explanation
The Framework states that the selection of the measurement bases and the concept of capital maintenance will determine the accounting model used. Entity size, auditor preference and tax rules are not stated as the determining factors.
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