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CMA Intermediate · Corporate Accounting and Auditing · Conceptual Framework

Which statement best reflects how the Conceptual Framework treats the cost constraint in relation to presentation and disclosure decisions?

Cost constrains presentation and disclosure just as it constrains other reporting decisions. Before presenting or disclosing information, one should consider whether the benefits to users are likely to justify the costs of providing and using that information.

  1. ACosts are irrelevant once information is relevant to users
  2. BOnly the cost to the preparer matters, not the cost to users
  3. CCost constrains presentation and disclosure decisions, so benefits to users should be likely to justify the costs of providing and using the informationCorrect
  4. DCost applies only to measurement and never to disclosure

Explanation

The Framework says that, just as cost constrains other financial reporting decisions, it constrains presentation and disclosure. It requires considering whether user benefits are likely to justify the costs of providing and using the information. The other options ignore this or restrict it to one party.

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