Conceptual Frameworks for Accounting Standards II

FINANCIAL ACCOUNTING AND ACCOUNTING STANDARDS

1. The financial statements most frequently provided include all of the following except the
a. statement of financial position.
b. income statement.
c. statement of cash flows.
d. statement of retained earnings.
2. All the following are differences between financial and managerial accounting in how accounting
information is used except to:
a. plan and control company's operations.
b. decide whether to invest in the company.
c. evaluate borrowing capacity to determine the extent of a loan to grant.
d. All the above. do
3. Which of the following represents a form of communication through financial reporting but not through
financial statements?
a. statement of financial position.
b. President's letter.
c. Income statement.
d. Notes to financial statements.
4. The process of identifying, measuring, analyzing, and communicating financial information needed by
management to plan, evaluate, and control an organization's operations is called
a.  financial accounting.
b. managerial accounting.
c. tax accounting.
d. auditing.
5. The major financial statements include all of the following except:
a. Statement of financial position.
b. Statement of changes in financial position.
c. Statement of comprehensive income.
d. Statement of stockholders' equity.

6. Which of the following statements is true?

a. Over 115 countries require or permit use of International Financial Reporting Standards
(IFRS).
b. Canada is the most significant holdout from use of International Financial Reporting
Standards (IFRS).
c. Nearly 50% of investors in the United States own foreign securities, either directly or
through funds.
d. To facilitate efficient capital allocation, investors need relevant do information stated in a
common currency.

7. How does accounting help the capital allocation process attract investment capital?
a. Provides timely, relevant information.
b. Encourages innovation.
c. Promotes productivity
 d. a and b above.

8. An effective capital allocation process

a. promotes productivity.
b. encourages innovation.
c. provides an efficient market for buying and selling securities
d. all of these

9. What would be an advantage of having all countries adopt and follow the same accounting standards?
a. Consistency.
b. Comparability.
c. Lower preparation costs.
d. b and c

10. General-purpose financial statements are the product of

a. financial accounting
b. managerial accounting
c. both financial and managerial accounting.
d. neither financial nor managerial accounting

11. Users of financial reports include all of the following except

a. creditors.
b. government agencies.
c. unions
d. All of these are users.

12. The information provided by financial reporting pertains to

a. individual business enterprises, rather than to industries or an economy as a whole or to
members of society as consumers.
b. business industries, rather than to individual enterprises or an economy as a whole or to
members of society as consumers.
c. individual business enterprises, industries, and an economy as a whole, rather than to
members of society as consumers.
d. an economy as a whole and to members of society as consumers, rather than to individual
enterprises or industries.

13. What is a major objective of financial reporting?

a. Provide information that is useful to management in making decision.
b. Provide information that clearly portray nonfinancial transactions.
c. Provide information that is useful to assess the amounts, timing, and uncertainty of
perspective cash receipts.
d. Provide information that excludes claims to the resources
e.
14. Which of the following statements is not an objective of financial reporting?
a. Provide information that is useful in investment and credit decisions.
b. Provide information about enterprise resources, claims to those resources, and changes to
them.
c. Provide information on the liquidation value of an enterprise.
d. Provide information that is useful in assessing cash flow prospects.
15. Accrual accounting is used because
a. cash flows are considered less important
b. it provides a better indication of ability to generate cash flows than the cash basis.
c. it recognizes revenues when cash is received and expenses when cash is paid.
d. none of the above

16. One element of the objective of financial reporting is to provide

a. information about the investors in the business entity.
b. information about the liquidation values of the resources held by the enterprise.
c. information that is useful in assessing cash flow prospects.
d. information that will attract new investors.

17. As part of the objective of general-purpose financial reporting, there is an emphasis on "assessing cash
flow prospects." Under International Financial Reporting Standards (IFRS) this is interpreted to mean:
a. Cash basis accounting is preferred over accrual-based accounting.
b. Information about the financial effects of cash receipts and cash payments is generally
considered the best indicator of a company's present and continuing ability to generate
favorable cash flows.
c. Over the long run, trends in revenues and expenses are generally more meaningful than
trends in cash receipts and disbursements.
d. All of the choices are correct regarding "assessing cash flow prospects" under IFRS.

18. What is due process in the context of standard setting at the IASB?
a. FASB operates in full view of the public.
b. Public hearings are held on proposed accounting standards.
c. Interested parties can make their views known.
d.  All of the above.
e.
19. Which of these statements regarding the IFRS and U.S. GAAP is correct?
a. U.S. GAAP is considered to be "principles-based" and more detailed than IFRS.
b.  U.S. GAAP is considered to be "rules-based" and less detailed than IFRS.        
c.  IFRS is considered to be "principles-based" and less detailed than U.S. GAAP
d. Both U.S. GAAP and IFRS are considered to be "rules-based", but U.S. GAAP tend to be
more complex.

20. The IASB's standard-setting structure includes all of the following except:
a. Financial Reporting Interpretations Committee
b.  Standards Advisory Council
c. Standards Comparison Committee
d.  Trustees
21. The following published documents are part of the "due process" system used by the IASB in the evolution
of atypical IASB Standard
1. Exposure Draft
2. IASB Standard
3. Discussion Paper
The chronological order in which these items are released is as follows:
a. 1,2,3
b. 1,3,2
c. 2,3,1
 d. 3,1,2

22. The purpose of the International Accounting Standards Board is to

a. issue enforceable standards which regulate the financial accounting and reporting of
multinational corporations.
b. develop a uniform currency in which the financial transactions of companies throughout
the world would be measured.
c. develop a single set of high-quality IFRS.
d. arbitrate accounting disputes between auditors and international companies.

23. In the past, many countries have relied on their own standard-setting organizations. The standards issued
by these various standard-setting organizations around the world include
a. Tax-oriented standards.
b. Business-based standards.
c. Principles-based standards.
d. All of the choices are correct.

24. The two major standard-setting organizations in the world are

a. Financial Accounting Standards Board (FASB) and the International Organization of
Securities Commission (IOSCO). 
b. Financial Accounting Standards Board (FASB) and the International Accounting
Standards Board (IASB).
c. The International Accounting Standards Board (IASB) and International Organization of
Securities Commission (IOSCO).
d. The International Accounting Standards Board (IASB) and the Standards Advisory
Council (SAC).

25. When comparing U.S. GAAP and International Financial Reporting Standards (IFRS)
a. IFRS are considered more comprehensive than U.S. GAAP.
b. IFRS contain more implementation guidance than U.S. GAAP.
c. IFRS are considered more principles-based than U.S. GAAP.
d. All of the choices are correct regarding U.S. GAAP and IFRS.

26.  Which of the following organizations is not among the four international standard-setting organizations?
a. Accounting Standards Committee Foundation (IASCF). 
b. Standards Advisory Council (SAC).
c. International Financial Reporting Interpretations Committee (IFRIC).
d. International Organization of Securities Commissions (IOSCO).
 
27. The International Accounting Standards Board (IASB) follows specific steps in developing International
Financial Reporting Standards (IFRS). Place the following steps in the correct order:
1. Research and analysis conducted; preliminary views of pros and cons issued.         
2. Topics identified and placed on the agenda.
3. Board evaluates responses, final standard issued. 
4. Public hearing on proposed standard
5. Board evaluates research, issues exposure draft.

a. 1, 2, 3, 4, 5
b. 2, 1, 4, 5, 3
 c. 1, 2, 5, 4, 3
d. 1, 2, 5, 3, 4

28. Which of the following is true with regard to the characteristics of the International Accounting Standards
Board (IASB)?
a. A unanimous vote by all Board members is needed to issue a new International Financial
Reporting Standard (IFRS).
b. The IASB consists of 14 part-time members.
c. Each member of the IASB must come from a different country.
d. IASB members are appointed for 5-year renewable terms.

29. International financial reporting interpretations (issued by the International Accounting Standards Board)
a. Are considered authoritative and must be followed.
b. Cover newly identified financial reporting issues not specifically addressed by the IASB.
c. Cover issues where unsatisfactory or conflicting interpretations have developed.
d. All of the choices are correct regarding International financial reporting interpretations.

30. Which of the following statements is true regarding the International Accounting Standards Board
(IASB)?
a. The IASB is a regulatory agency with enforcement powers for its International Financial
Reporting Standards (IFRS).
b. The IASB is a public organization, funded by taxpayer dollars from member countries.
c. Is comprised of 14 members from 9 countries.
d. All of the choices are correct regarding the IASB.

1. D 11. D 21. D
2. D 12. A 22. C
3. B 13. C 23. D
4. B 14. C 24. B
5. B 15. B 25. C
6. A 16. C 26. D
7. A 17. C 27. B
8. D 18. D 28. D
9. D 19. C 29. D
10. A 20. C 20. C