Which one of the following statements is false?
A reporting entity must prepare general purpose financial reports that comply with accounting standards.
Correct!
The definition of reporting entity forms the foundation of the Conceptual Framework as all other elements flow from it.
Generally accepted accounting principles are a set of standards and rules that are recognised as a general guide for financial reporting.
The objective of general purpose financial reports is to provide information that is useful to existing and potential investors, creditors and other external users.
The Conceptual Framework consists of a set of concepts to be followed by the preparers of financial statements and standard setters.
The statement "The definition of reporting entity forms the foundation of the Conceptual Framework as all other elements flow from it" is false. The Conceptual Framework does indeed establish fundamental concepts that guide the preparation and presentation of financial statements, but it is not centered solely on the definition of a reporting entity. The Conceptual Framework encompasses a broader set of concepts, including the objectives of financial reporting, qualitative characteristics of financial information, elements of financial statements, and more. These concepts collectively form the foundation for accounting standards and the preparation of financial reports.
