Conceptual Framework and Accounting Standard (CFAS) 

2 semester SY 2020-2021 Seatwork 2  36/50

nd

Directions: Choose the best answer among the choices for each question and highlight

your final answer.  (Green is the corrected answer, yellow is the original)

1. The International Accounting Standards Board was formed to  

a. Enforce IFRS in foreign countries  
b. Develop a single set of high quality IFRS  
c. Establish accounting standards for multinational entities  
d. Develop accounting standards for countries that do not have standard-setting body  

2. The IASB employs a “due process” system which  

a. Require that all CPAs must receive a copy of IFRS  
b. Is an efficient system for collecting dues from members 
c. Identifies the accounting issues that are the most important  
d. Enables interested parties to express their views on issues under consideration  

3. It is a global phenomenon intended to bring about transparency and a higher degree of

comparability in financial reporting in order to achieve the goal of one uniform and
globally accepted financial reporting standards.  
a. Borderless accounting  
b. IFRS  
c. Information technology  
d. World trade  

4. IFRIC Interpretations issued by IASB  

a. Are considered authoritative and must be followed  
b. Cover newly identified financial reporting issues not specifically addressed  
c. Cover issues where unsatisfactory or conflicting interpretations have developed  
d. All of these are true about IFRIC Interpretations  

5. Which of the following is not a purpose of the Conceptual Framework?  

a. To provide definitions to key terms and fundamental concepts  
b. To assist the FRSC in the standard-setting process  
c. To provide specific guidelines for resolving situations not covered by existing
accounting standards 
d. To assist accountants and others in selecting among alternative accounting and
reporting methods.  

6. What is the authoritative status of the Conceptual Framework?  

a. The Conceptual Framework has the highest level of authority.  
 b. In the absence of a standard or an interpretation that specifically applies to a
transaction, the  Conceptual Framework shall be followed.  
c. The Conceptual Framework applies only when the FRSC develops new or
revised standards. 
d. In the absence of a standard or an interpretation that specifically applies to
a transaction, management shall consider the applicability of the Conceptual
Framework in developing and applying an accounting policy that results in
information that is relevant and reliable. 
7. As regards the relationship between PFRS and the Conceptual Framework, which of the
following is true?
I. the Conceptual Framework is a reporting standard.  
II. In case of conflict, the requirements of the Conceptual Framework prevail over those
of the relevant PFRS.  
a. I only c. Both I & II  
b. II only d. Neither I nor II  

8. The Conceptual Framework is intended to establish  

a. The hierarchy of sources of GAAP  
b. The measuring of “present fairly in accordance with GAAP”  
c. Generally accepted accounting principles in financial reporting by entities  
d. The objectives and concepts for use in developing standards of financial accounting and
reporting  

9. What is the logical order of the following steps in the accounting cycle?  
a. Post the closing entries, take a post-closing trial balance, then journalize the
closing entries  
b. Journalize the closing entries, post the closing entries, and then take a post-
closing trial balance  
c. Post the journal entries to the ledger accounts, prepare a worksheet, and then
take a trial balance 
d. Prepare the earnings statement, prepare the statement of financial position and
then prepare a  worksheet  

10. An entity shall present  

a. Each financial statement with equal prominence  
b. The statement of cash flows more prominently than the other statements  
c. The statement of financial position more prominently than other statements  
d. The statement of comprehensive income more prominently than the other
statements  

BONUS 11. Which of the following is included in a complete set of financial statements?  
a. Value added statement  
b. A statement of changes in equity  
c. Statement of financial position for the last 5 years  
 d. A statement by the BOD of compliance with local legislation  

12. Financial statements include a statement of financial position, a statement of

comprehensive income, a statement of changes in equity, and a statement of cash flows.
Which of the following is also included within the financial statements?  
a. A director’s report c. a statement of retained earnings  
b. Accounting policies d. an auditor’s report  

13. Which of the following is not a component of the financial statements?  

a. Board of director’s report c. statement of changes in equity  
b. Notes to financial position d. statement of financial position  
 
14. When classifying assets as current and noncurrent for reporting purposes  
a. Prepayments are included in other assets rather than as current assets  
b. The amounts at which current assets are reported must reflect realizable cash
value  
c. Assets are classified as current if these are reasonably expected to be realized in
cash or consumed  during the normal operating cycle  
d. The time period by which current assets are distinguished from noncurrent assets is
determined by the seasonal nature of the business  

15. The basis for classifying assets as current or noncurrent is the period of time normally
elapsed from the time the accounting entity expends cash to the time it converts  
a. Inventory back into cash, or 12 months, whichever is longer  
b. Inventory back into cash, or 12 months, whichever is shorter  
c. Receivables back into cash, or 12 months, whichever is longer  
d. Tangible fixed assets back into cash, or 12 months, whichever is longer  

16. Which of the following items would cause earnings to differ from
comprehensive income?  a. Loss on exchange of similar assets  
b. Loss on exchange of dissimilar assets  
c. Unrealized loss on investments held for trading  
d. Unrealized loss on equity investments measured at FVTOCI  

17. All of the following are a component of OCI, except 

a. Change in revaluation surplus  
b. Foreign currency translation adjustment  
c. Deferred gain and loss on derivative financial instruments  
d. Unrealized gain and loss on financial assets held for trading  

18. When preparing a statement of cash flows using the direct method, amortization of
goodwill is a. Shown as an increase in cash flows from operating activities  
b. Shown as reduction in cash flows from operating activities  
 c. Included with supplemental disclosure of noncash transactions  
d. Not reported in the statement of cash flows or related disclosures  

19. Which of the following is not disclosed in the statement of cash flows when prepared
under the direct  method?  
a. The amount of income tax paid  
b. A reconciliation of net income to net cash flow from operations  
c. The major classes of gross cash receipts and gross cash payments  
d. A reconciliation of ending retained earnings to net cash flow from operations  

20. Which of the following would appear first in a statement of retained earnings?  
a. Net loss c. prior period error  
b. OCI d. share dividend  
 
21. Which occurrence would directly affect retained earnings?  
a. Goods purchased deemed worthless in the current year  
b. Collection in the current year of a dividend from an investment  
c. Sale in the current year of land donated by a shareholder in a prior year  
d. Correction of an error in the financial statements of a prior period discovered
subsequent to issuance  
  
22. Which type of accounting change should always be accounted for in current
and future periods? 
a. Change in accounting estimate c. change in reporting entity  
b. Change in accounting policy d. correction of an error  

23. The occurrence that most likely would have no effect on net income is  
a. Ending inventory deemed worthless in the current year  
b. Collection in the current year of a dividend from an investment  
c. Sale in the current year of an office building contributed by a shareholder in a
prior year 
d. Correction of an error in the financial statements of a prior period discovered
subsequent to the issuance of financial statements  

24. Which of the following statements in relation to accounting change is true?  

a. Prior statements should be restated for changes in accounting estimate  
b. Changes in accounting policy are always handled in the current and
prospective period 
c. Correction of a prior period errors should be considered as an adjustment of
current net income 
d. A change from expensing certain costs to capitalizing such costs due to a
change in the period benefited should be handled as a change in accounting
estimate  
 25. This is defined as “holders of instruments classified as equity”  
a. Equity holder’s c. owners  
b. Investors d. shareholders  

26. Which of the following is not a method of disclosing pertinent information?  

a. Supporting schedule  
b. Parenthetical explanation  
c. Cross reference and contra item  
d. All of these are methods of disclosing pertinent information  

27. Which of the following statements in relation to the standard of adequate disclosure is
true? 

I. In complying with the standard of adequate disclosure, accountants are guided by thee
doctrine that more information is always better than less  
II. Adequate disclosure is concerned not only with the kind of information contained
in the financial statements but also with the manner in which that information is
presented.  
a. I only c. Both I & II  
b. II only d. Neither I nor II  
 
28. Indicate the proper order of presenting the notes to financial statements.  
I. Statement of compliance with PFRS  
II. Other disclosures, such as contingent liabilities, unrecognized contractual
commitments and nonfinancial disclosures  
III. Supporting information for items presented on the face of the financial statements  
IV. Summary of significant accounting policies  
a. I, II, III, IV c. I, IV, II, III  
b. I, III, IV, II d. I, IV, III, II  

29. The presentation of the notes to financial statements in a systematic manner  

a. Depends on the industry c. is voluntary  
b. Is mandatory d. is mandatory, as far as practicable  

30. An entity is required to disclose certain nonfinancial information. Which is not embraced in this
disclosure? 

a. Names and addresses of the corporate directors and officers  

b. The name of the parent entity and the ultimate parent of the group  
c. A description of the nature of the entity’s operations and its principal activities  
d. Domicile and legal form of the entity, its country of incorporation and address of
the registered office  
31. The revised IAS 10 states that if an entity declares dividends after the reporting period,
the entity ______ those dividends as a liability at the end of the reporting period.  
a. Shall recognize c. is encouraged to recognized  
b. Shall not recognize d. is encouraged not to recognized  

32. Which of the following is not an objective of IAS 10?  

a. To prescribe when an entity should adjust its financial statements for events after
reporting period 
b. To prescribe how an entity should distinguish favorable events from
unfavorable  
c. To prescribe disclosures that an entity should give about the date when the financial
statements were authorized for issue and about events after the reporting period  
d. To require an entity should not prepare financial statements on a going concern basis
if events after reporting period indicate the going concern assumption is not
appropriate  

33. Events after the reporting period are _____________ events that occur between the end
of the reporting period and the date when the financial statements are authorized for
issue.  
a. Predictable d. unfavorable  
b. Non-predictable e. B&D  
c. Favorable f. C&D  

34. Which of the following information cannot indicate that the asset as impaired at the end
of the reporting period?  
a. The bankruptcy of a customer after the reporting period  
b. The sales of inventories after the reporting period 
c. The destruction of a major production plant by a fire after the reporting period.  
d. All of the above  
 
35. IAS 1 uses terminology that is suitable for ___________________.  
a. Profit-oriented entities d. A & B  
b. Public sector business entities e. All of the above  
c. Entities operating in not-for-profit sector  

36. Under which of the following circumstances is a misstatement material?  

a. If it exceeds 10% of the entity’s share capital  
b. If it could, individually or collectively, influence the economic decisions that user
make on the basis of the financial statements  
c. If maximum effort is required in order to correct  
d. All of the above  

37. Which of the following does not comprise a set of financial statements?  
 a. Statement of financial position as at the end of the period  
b. Statement of profit or loss and OCI, changes in equity and cash
flow for the period 
c. Report of the entity’s sources of funding  
d. Comparative information in respect of the preceding period and notes,
comprising significant  accounting policies and other explanatory information  

38. A statement of cash flows, when used in conjunction with the rest of the financial
statements, provides information that enables users to evaluate the ______________.  
a. Changes in an entity’s profit before tax  
b. Organizational structure of the entity  
c. Entity’s ability to affect the amounts and timing of cash flows in order to
adapt to changing circumstances and opportunities  
d. All of the above  

39. Rem Inc. reported cost of goods sold of P550, 000 in its most recent financial statements.
The following changes also occurred during the period: (1) Inventory increase of
P120,000 and (2) decrease in accounts  payable of P30,000. The company prepares its
statement of cash flows using the direct method. How much should it report as cash paid
to suppliers?  
a. P550,000 c. P430,000  
b. P400,000 d. P700,000  

40. Investments normally qualify as a cash equivalent only when they have a short maturity of
__________. 

a. 3 months or less from reporting date  

b. 6 months or less from reporting date  
c. 3 months or less from date of acquisition  
d. 6 months or less from date of acquisition  

41. Which of the following is not an example of cash flows from

operating activities? 

a. Cash receipts from sale of goods and the rendering of services  

b. Cash receipts and cash payments of an insurance entity for premiums and claims,
annuities and other policy benefits  
c. Cash receipts from sales of PPE, intangibles and other long-term assets  
d. Cash receipts and payments from contracts held for trading or
dealing purposes 
e. A & B 
42. IAS 8 ___________ disclosure of an impending change in accounting policy when an
entity has yet to  implement a new IFRS that has been issued but not yet come into
effect.  
 a. Prohibits c. encourages  
b. Requires d. allows  

43. Under which of the following circumstances is IAS 8 applicable?  

a. Selecting and applying accounting policies  
b. Accounting for changes in accounting policies  
c. Changes in prior period errors  
d. None of the above  

44. It is ________ to make, or leave uncorrected, immaterial departures from IFRRS to

achieve a particular presentation of an entity’s financial position, financial performance,
or cash flows.  
a. Prohibited c. permissible  
b. Inappropriate d. advisable  

45. What shall management consider first in order to exercise its judgment in the absence
of an IFRS that specifically applies to a transaction, other event or condition?  
a. The principles IASB Conceptual Framework  
b. The requirements in IFRSs dealing with similar and related issues  
c. The requirements in other recognized GAAP  
d. Accepted industry practices  

46. When developing requirements for IFRS Standards, can the International Accounting
Standards Board depart from the Conceptual Framework?  
a. No  
b. Yes, the Board is not required to use the Conceptual Framework when developing
Standards 
c. Yes, but only from aspects of the Conceptual Framework and only if doing so is
needed to meet the objective of financial reporting  
d. Maybe  

47. Entities have to apply the revised Conceptual Framework:  

a. Immediately after it is issued  
b. For annual reporting periods beginning on or after 1 January 2020, with early
application permitted 
c. Never - the Conceptual Framework is only used by the International Accounting
Standards Board 
d. Whenever it wants to  

48. The objective of general purpose financial reporting as described in the Conceptual
Framework is to: 

a. Provide information to regulators  

 b. Support the entity's tax return  
c. Meet the information needs of an entity's stakeholders  
d. Provide financial information about the reporting entity that is useful to existing
and potential investors, lenders and other creditors in making decisions relating
to providing resources to the entity  

 
49. How does the Conceptual Framework explain the role of stewardship?  
a. Providing information needed to assess management's stewardship is identified as
an additional objective of financial reporting, equal in prominence to providing
financial information useful to users in making decisions relating to providing
resources to the entity  
b. Decisions relating to providing resources to the entity depend on users' assessment
of the amount, timing and uncertainty of the prospects for future net cash inflows to
the entity and on their assessment of management's stewardship  
c. Providing information needed to assess stewardship is more important than
providing information needed to assess the prospects for future cash inflows to the
entity  
d. Financial reports are not intended to provide information needed to assess
stewardship  

50. The fundamental qualitative characteristics of useful financial information are:  

a. Comparability and relevance  
b. Relevance and reliability  
c. Relevance, reliability and comparability  
d. Relevance and faithful representation  
e. Comparability, relevance and faithful representation