Case 1: There had been a group discussion on various aspects related to accounting standards amongst a few fresh graduates. Each graduate had come up with an opinion about the topics that are been discussed below. You are required to review each of the discussion and validate their opinion with required explanation. Also, you need to provide the correct opinion in case you disagree with all the opinions. Each of the given discussion should be commented upon within 75 - 150 words. The question contains 5 discussions Discussion 1: It is very clear that conceptual framework is a basic document that sets objectives and the concepts for general purpose financial reporting. But there were significant doubts with regards to the authoritative status of the Framework. (2 marks) Graduate 1 mentioned that conceptual framework is given the highest authority. In case of a conflict between the Framework and a Standard or Interpretation, then the Framework overrides the Standard or Interpretation Graduate 2 mentioned that if there is a Standard or Interpretation that specifically applies to a transaction, it overrides the Framework. In the absence of a Standard or an Interpretation that specifically applies, the Framework should be followed. Graduate 3 mentioned that If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the Framework. In the absence of a Standard or an Interpretation that specifically applies to a transaction management should consider the applicability of the Framework in developing and applying an accounting policy that results in information that is relevant and reliable. Graduate 4 mentioned that the Framework applies only when IASB develops new or revised Standards. An entity is never required to consider the Framework Discussion 2: The Conceptual Framework indicates certain fundamental and enhancing qualitative characteristics of useful financial information. It mentions prudence as one of the criteria that aid faithful representation. So, the graduates were been asked to describe prudence in the best possible manner: (2 marks) Graduate 1 described it as the exercise of caution when making judgments under conditions of uncertainty Graduate 2 stressed that it's a bias towards treatment of assets and income allowing their understatement or overstatement Graduate 3 mentioned that it's a mechanism for always showing profits in the income statement Graduate 4 explained it as a form of accounting conservatism Discussion 3: A conceptual framework extensively deals with the definitions of individual elements of the financial statements. The point of discussion was however that it also sets out the detailed accounting treatment of transactions and other items. (2 marks) All the graduates agreed to the point that conceptual framework sets out a detailed accounting treatment of transaction and other items Discussion 4: Expenses are defined as decreases in assets or increases in liabilities resulting in decreases in equity, other than distributions to equity holders. The graduates where been told to state the basis on which such expenses are recognized in Statement of Comprehensive Income (profit or OCT) (2 marks) Graduate 1 mentioned that expenses are recognized using the matching basis-based on a direct relationship between the costs incurred and the revenue eamed Graduate 2 stated that expenses are recognized using the accrual basis-items are recognized as assets, liabilities, equity, income or expenses when they satisfy the definitions and recognition criteria for those items Graduate 3 told that expenses are recognized at the discretion of management Graduate 4 was confused and had no opinion about it Discussion 5: In making the financial statements more understandable an entity can present information of reporting currency units in thousands or millions. An entity can adopt different levels of rounding for different disclosures that are made in the financial statements. (2 marks) All the graduates agreed to it that an entity can adopt different levels of rounding for different disclosures that are made in the financial statements