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ACCA Applied Knowledge · Financial Accounting · Qualitative characteristics of useful financial information

Which of the following is the most accurate statement about how the removal of the explicit term 'prudence' in the 2010 Conceptual Framework was reversed in 2018?

The 2018 Framework reintroduced prudence as the exercise of caution under uncertainty in support of neutrality. It did not make prudence a separate fundamental or enhancing qualitative characteristic, and it does not override faithful representation or relevance.

  1. AThe 2018 Framework reintroduced prudence, described as caution under uncertainty, in support of neutrality, without making it a separate qualitative characteristicCorrect
  2. BThe 2018 Framework made prudence a fundamental qualitative characteristic ranked above relevance
  3. CThe 2018 Framework made prudence an enhancing qualitative characteristic
  4. DThe 2018 Framework confirmed prudence has no place in financial reporting and does not mention it

Explanation

The 2010 Framework dropped prudence, partly because it conflicted with neutrality. The 2018 version reinstated the concept as cautious judgement under uncertainty supporting neutrality, but it is not listed as a qualitative characteristic, fundamental or enhancing.

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