ACCA Applied Skills · Financial Reporting · The need for a conceptual framework and the characteristics of useful information
Under the IASB's Conceptual Framework for Financial Reporting, which underlying assumption is stated as the one on which general purpose financial statements are normally prepared?
Going concern is the underlying assumption stated in the Conceptual Framework. Financial statements are normally prepared assuming the entity will continue operating for the foreseeable future, with no intention or need to liquidate or cease trading. Historical cost is a measurement basis, and prudence is not an assumption.
- AGoing concernCorrect
- BAccruals basis
- CHistorical cost basis
- DPrudence
Explanation
The Conceptual Framework states that financial statements are normally prepared on the assumption that the reporting entity is a going concern and will continue in operation for the foreseeable future. Accruals is a basis of accounting under IAS 1, not the Framework's stated underlying assumption. Historical cost is a measurement basis, and prudence is not a separate underlying assumption.
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