What Is the Purpose of Developing a Conceptual Framework

question 6

Multiple Choice

What is the purpose of developing a conceptual framework?

• A) To provide a coherent structure to accounting practice which had developed in an ad hoc way.
• B) To guide standard-setters to develop standards based on the same concepts and principles, rather than in a piecemeal approach.
• C) To guide users where there is no accounting standard covering an issue.
• D) All of the given options are correct.

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Definitions:

Depreciation Recapture

A tax provision that allows the IRS to collect taxes on any profitable sale of an asset that had previously benefited from tax deductions through depreciation.

Installment Method

The installment method is a tax provision that allows taxpayers to spread income recognition over the period they receive payments from the sale of certain property.

Gain Recognized

The profit realized from the sale of assets over its adjusted basis, which must be reported for tax purposes.

Like-kind Exchange Provisions

Tax regulations allowing the deferral of tax liability when business or investment properties are exchanged for similar properties.