Intermediate accounting Ch1 Test Bank

8/12/2019 Intermediate accounting Ch1 Test Bank

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CHAPTER 1

FINANCIAL ACCOUNTING ANDACCOUNTING STANDARDS

IFRS questions are available at te en! o" tis #a$ter%

TRUE&FALSE'Con#e$tual

Ans(er No% Des#ri$tion

F 1. Definition of financial accounting.T 2. Purpose of financial statements.T 3. Definition of financial accounting.T 4. Capital allocation process.F 5. Objective of financial reporting.

T . Decision!"sefulness approac#.T $. "sers of financial statements.F %. Committee on &ccounting Proce'ure.F (. Passage of ne) F&*+ statement.T 1,. *tatements of Financial &ccounting Concepts.T 11. Creation of &ccounting Principles +oar'.F 12. F&*+ Co'ification.T 13. Co'e of Professional Con'uct.F 14. -&&P an' political action.T 15. Public Compan &ccounting Oversig#t +oar'.T 1. /0pectations gap.F 1$. Financial reports.

F 1%. Fair value information.F 1(. nternational Financial eporting *tan'ar's.F 2,. /t#ical issues.

)ULTIPLE CHOICE'Con#e$tual


a 21. Financial accounting.' 22. "sers of financial reports.' 23. 'entif t#e major financial statements.a 24. Financial reporting entit.' 25. Differences bet)een financial an' managerial accounting.

b 2. Financial reporting communication.b 2$. anagerial accounting.a 2%. Capital allocation process.' 2(. /fficient use of resources.' 3,. Capital allocation process.c 31. Financial statement information.c 32. &ccounting profession c#allenge.c 33. Financial reporting objective.' 34. Financial statements primar users.


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Test *an+ "or Inter,e!iate A##ountin-. Fi"teent E!ition

c 35. nvestors 'ecision maing.

)ULTIPLE CHOICE'Con#e$tual 6cont.7


b 3. &ccrual accounting.

c 3$. /ntit perspective.c 3%. eaning of 8generall accepte'.9b 3(. Common set of stan'ar's an' proce'ures.a 4,. :imitation of general purpose financial statements.c 41. *ecurities an' /0c#ange Commission an' accounting stan'ar' setting.' 42. Due process in F&*+ stan'ar' setting.' 43. Organi;ations responsible for setting accounting stan'ar's.b 44. eason for &ccounting Principles +oar' creationb 45. Organi;ation issuing &ccounting esearc# +ulletins.a 4. C#aracteristic of -&&P.c 4$. C#aracteristics of -&&P.' 4%. F&*+ accounting stan'ar's.

c 4(. F&*+ stan'ar' passage.b 5,. Purpose of /merging ssues Tas Force.a 51. &CP& role in stan'ar' setting.c 52. ole of */C.c 53. Po)ers of t#e */C.' 54. */C enforcement.' 55. Creation of F&*+.' 5. &ppointment of F&*+ members.a 5$. Purpose of t#e Financial &ccounting Foun'ation.b 5%. C#aracteristics of F&*+.b 5(. F&*+ an'


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Financial &ccounting an' &ccounting *tan'ar's

)ULTIPLE CHOICE'Con#e$tual 6cont.7


' $(. *tan'ar' setting process pressure.a %,. Danger of politics in stan'ar' setting

c %1. Definition of


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SU))AR4 OF LEARNING O*ECTI2ES *4 5UESTIONS

Item Type Item Type Item Type Item Type Item Type Item Type Item Type

Learnin- Ob6e#tive 1

1. TF 21. C 23. C 25. C

P

2$. C2. TF 22. C 24. C 2. C

Learnin- Ob6e#tive /

3. TF 4. TF 2%. C 2(. C 3,. C


5. TF 33. C 35. C 3$. C. TF 34. C 3. C %5. /


$. TF 3%. C 3(. C 4,. C %. /


%. TF 43. C 4(. C 55. C 1. C $. C %(. /(. TF 44. C 5,. C 5. C 2. C P%. C1,. TF 45. C 51. C 5$. C 3. C P(. C11. TF 4. C 52. C 5%. C 4. C P%. /41. C 4$. C 53. C 5(. C 5. C %$. /42. C 4%. C 54. C ,. C . C %%. /


12. TF $,. C $2. C $4. C $. C13. TF $1. C $3. C $5. C

Learnin- Ob6e#tive :

14. TF 1. TF $$. C $(. C %1. C %3. /

15. TF 2. C $%. C %,. C %2. CLearnin- Ob6e#tive ;

1$. TF 1%. TF 1(. TF 31. C 32. C

Learnin- Ob6e#tive IFRS 5UESTIONS

1. TF 2. TF 3. TF 4. TF 5. TF . TF $. C

%. C (. C 1,. C 11. C 12. C 13. C 14. C

15. *& 1. *&

=ote> TF @ True!False *&@ *#ort &ns)erC @ ultiple C#oice/ @ /0ercise

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TRUE&FALSE'Con#e$tual

1. Financial accounting is t#e process of i'entifingA measuringA anal;ingA an' communicatingfinancial information nee'e' b management to planA evaluateA an' control a compansoperations.

2. Financial statements are t#e principal means t#roug# )#ic# a compan communicates itsfinancial information to t#ose outsi'e it.

3. "sers of financial reports of a compan use t#e information provi'e' b t#ese reports tomae t#eir capital allocation 'ecisions.

4. &n effective process of capital allocation promotes pro'uctivit an' provi'es an efficientmaret for buing an' selling securities an' obtaining an' granting cre'it.

5. T#e objective of financial reporting is to report t#e plans ma'e b a compan to improve t#e

pro'uctivit of its emploees.

. nvestors are intereste' in financial reporting because it provi'es information t#at is usefulfor maing 'ecisions.

$. "sers of financial accounting statements #ave bot# coinci'ing an' conflicting nee's forinformation of various tpes.

%. T#e *ecurities an' /0c#ange Commission appointe' t#e Committee on &ccountingProce'ure.

(. T#e passage of a ne) F&*+ &ccounting *tan'ar's "p'ate re?uires t#e support of five of

t#e seven boar' members.

1,. *tatements of Financial &ccounting Concepts set fort# fun'amental objectives an'concepts t#at are use' b t#e F&*+ in 'eveloping future stan'ar's of financial accountingan' reporting.

11. T#e &CP& create' t#e &ccounting Principles +oar' in 1(5(.

12. T#e F&*+s Co'ification creates a ne) set of -&&P.

13. T#e &CP&s Co'e of Professional Con'uct re?uires t#at members prepare financialstatements in accor'ance )it# generall accepte' accounting principles.

14. -&&P is a pro'uct of careful logic or empirical fin'ings an' is not influence' b politicalaction.

15. T#e Public Compan &ccounting Oversig#t +oar' #as oversig#t an' enforcement aut#oritan' establis#es au'iting an' in'epen'ence stan'ar's an' rules.

1. T#e e0pectations gap is 'ue to t#e 'ifference bet)een )#at t#e public t#ins accountantss#oul' 'o an' )#at accountants t#in t#e can 'o.

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1$. Financial reports in t#e earl 21st centur 'i' not provi'e an information about acompans soft assets 6intangibles7.

1%. &ccounting stan'ar's are no) less liel to re?uire t#e recor'ing or 'isclosure of fair valueinformation.

1(. ".*. companies t#at list overseas are re?uire' to use nternational Financial eporting*tan'ar'sA issue' b t#e nternational &ccounting *tan'ar's +oar'.

2,. /t#ical issues in financial accounting are governe' b t#e &CP&.

True&False Ans(ers'Con#e$tual

Ite, Ans% Ite, Ans% Ite, Ans% Ite, Ans%

1. F . T 11. T 1. T2. T $. T 12. F 1$. F3. T %. F 13. T 1%. F

4. T (. F 14. F 1(. F5. F 1,. T 15. T 2,. F

)ULTIPLE CHOICE'Con#e$tual

21. -eneral!purpose financial statements are t#e pro'uct ofa. financial accounting.b. managerial accounting.c. bot# financial an' managerial accounting.'. neit#er financial nor managerial accounting.

22. B#ic# of t#e follo)ing is not a user of financial reportsa. Cre'itors.b. -overnment agencies.c. "nions.'. &ll of t#ese are users.

23. T#e financial statements most fre?uentl provi'e' inclu'e all of t#e follo)ing e?#e$tt#ea. balance s#eet.b. income statement.c. statement of cas# flo)s.'. statement of retaine' earnings.

24. T#e information provi'e' b financial reporting pertains toa. in'ivi'ual business enterprisesA rat#er t#an to in'ustries or an econom as a )#ole or

to members of societ as consumers.b. business in'ustriesA rat#er t#an to in'ivi'ual enterprises or an econom as a )#ole or

to members of societ as consumers.c. in'ivi'ual business enterprisesA in'ustriesA an' an econom as a )#oleA rat#er t#an to

members of societ as consumers.'. an econom as a )#ole an' to members of societ as consumersA rat#er t#an to

in'ivi'ual enterprises or in'ustries.

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25. &ll t#e follo)ing are 'ifferences bet)een financial an' managerial accounting in #o)accounting information is use' e?#e$t toa. plan an' control compans operations.b. 'eci'e )#et#er to invest in t#e compan.c. evaluate borro)ing capacit to 'etermine t#e e0tent of a loan to grant.'. &ll t#e ans)er c#oices are correct.

2. B#ic# of t#e follo)ing represents a form of communication t#roug# financial reporting butnot t#roug# financial statementsa. +alance s#eet.b. Presi'ents letter.c. ncome statement.'. =otes to financial statements.

P2$. T#e process of i'entifingA measuringA anal;ingA an' communicating financial informationnee'e' b management to planA evaluateA an' control an organi;ations operations iscalle'a. financial accounting.b. managerial accounting.c. ta0 accounting.'. au'iting.

2%. Eo) 'oes accounting #elp t#e capital allocation process attract investment capitala. + provi'ing timelA relevant information.b. + encouraging innovation.c. + promoting pro'uctivit.'. + provi'ing timelA relevant information an' b encouraging innovation.

2(. B#ic# of t#e follo)ing #elps in 'etermining )#et#er a business t#rivesa. arets.

b. Free enterprise.c. Competition.'. &ll of t#ese ans)er c#oices are correct.

3,. B#ic# of t#e follo)ing is relate' to an effective capital allocationa. Promoting pro'uctivit.b. /ncouraging innovation.c. Provi'ing an efficient maret for buing an' selling securities.'. &ll of t#ese ans)er c#oices are correct.

31. Financial statements in t#e earl 2,,,s provi'e information relate' toa. nonfinancial measurements.

b. for)ar'!looing 'ata.c. #ar' assets 6inventor an' plant assets7.'. =one of t#ese ans)er c#oices are correct.

32. B#ic# of t#e follo)ing is nota major c#allenge facing t#e accounting professiona. =onfinancial measurements.b. Timeliness.c. &ccounting for #ar' assets.'. For)ar'!looing information.

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33. B#at is t#e objective of financial reportinga. Provi'e information t#at is useful to management in maing 'ecisions.b. Provi'e information t#at clearl portras nonfinancial transactions.c. Provi'e information about t#e reporting entit t#at is useful to present an' potential

e?uit investorsA len'ersA an' ot#er cre'itors.'. Provi'e information t#at e0clu'es claims to t#e resources.

34. Primar users for general!purpose financial statements inclu'ea. cre'itors.b. emploees.c. investors.'. bot# cre'itors an' investors.

35. B#ic# of t#e follo)ing )ill be of interest to investors in 'ecision!mainga. &ssessing t#e compans abilit to generate net cas# inflo)s.b. &ssessing managements abilit to protect an' en#ance t#e capital provi'ers

investments.c. +ot# assessing t#e compans abilit to generate net cas# inflo)s an' assessing

managements abilit to protect an' en#ance t#e capital provi'ers investments.'. &ssessing t#e compans abilit to collect 'ebts.

3. &ccrual accounting is use' becausea. cas# flo)s are consi'ere' less important.b. it provi'es a better in'ication of a compans abilit to generate cas# flo)s t#an t#e

cas# basis.c. it recogni;es revenues )#en cas# is receive' an' e0penses )#en cas# is pai'.'. =one of t#e ans)er c#oices are correct.

3$. B#ic# perspective is a'opte' as a part of t#e objective of general!purpose financialreporting

a. & 'ecision!usefulness perspective.b. & proprietar perspective.c. &n entit perspective.'. & financial reporting perspective.

3%. B#ic# of t#e follo)ing is a re?uirement for an accounting principle to be calle'


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4,. B#ic# of t#e follo)ing is a general limitation of


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4$. C#aracteristics of generall accepte' accounting principles inclu'e all of t#e follo)inge?#e$ta. aut#oritative accounting t#at t#e rule!maing bo' #as establis#e' as a principle of

reporting.b. stan'ar's are consi'ere' useful b t#e profession.c. eac# principle is approve' b t#e */C.'. practice #as become universall accepte' over time.

4%. B# )as it believe' t#at accounting stan'ar's t#at )ere issue' b t#e Financial&ccounting *tan'ar's +oar' )oul' carr more )eig#ta. *maller members#ip.b. T#e F&*+ boar' members )ere )ell!pai'.c. T#e F&*+ boar' members )ere CP&s.'. Due process.

4(. T#e passage of a ne) F&*+ &ccounting *tan'ar's "p'ate re?uires t#e support ofa. seven +oar' members.b. t#ree +oar' members.c. four +oar' members.'. five +oar' members.

5,. B#at is t#e purpose of /merging ssues Tas Forcea. Provi'e interpretation of e0isting stan'ar's.b. Provi'e a consensus on #o) to account for ne) an' unusual financial transactions.c. Provi'e interpretive gui'ance.'. Provi'e timel gui'ance on select issues.

51. B#ic# organi;ation is responsible for issuing /merging ssues Tas Force *tatementsa. T#e F&*+

b. T#e C&Pc. T#e &P+'. T#e */C

52. T#e role of t#e *ecurities an' /0c#ange Commission in t#e formulation of accountingprinciples can be best 'escribe' asa. consistentl primar.b. consistentl secon'ar.c. sometimes primar an' sometimes secon'ar.'. non!e0istent.

53. T#e bo' t#at #as t#e po)er to prescribe t#e accounting practices an' stan'ar's to be

emploe' b companies t#at fall un'er its juris'iction is t#ea. F&*+.b. &CP&.c. */C.'. &P+.

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54. Companies t#at are liste' on a stoc e0c#ange are re?uire' to submit t#eir financialstatements to t#ea. &CP&.b. &P+c. F&*+.'. */C.

55. T#e Financial &ccounting *tan'ar's +oar' 6F&*+7 )as propose' b t#ea. &merican nstitute of Certifie' Public &ccountants.b. &ccounting Principles +oar'.c. *tu' -roup on t#e Objectives of Financial *tatements.'. *tu' -roup on establis#ment of &ccounting Principles 6B#eat Committee7.

5. B#ic# of t#e follo)ing is true of t#e Financial &ccounting *tan'ar's +oar'a. t #as issue' a series of pronouncements entitle' &u'iting *tan'ar's "p'ates.b. t )as t#e forerunner of t#e current &ccounting Principles +oar'.c. t is t#e arm of t#e *ecurities an' /0c#ange Commission responsible for setting

financial accounting stan'ar's.'. T#e members of t#e F&*+ are appointe' b t#e Financial &ccounting Foun'ation.

5$. T#e Financial &ccounting Foun'ationa. oversees t#e operations of t#e F&*+.b. oversees t#e operations of t#e &CP&.c. provi'es information to intereste' parties on financial reporting issues.'. )ors )it# t#e Financial &ccounting *tan'ar's &'visor Council to provi'e informa!

tion to intereste' parties on financial reporting issues.

5%. T#e major 'istinction bet)een t#e Financial &ccounting *tan'ar's +oar' 6F&*+7 an' itspre'ecessorA t#e &ccounting Principles +oar' 6&P+7A is

a. t#e F&*+ issues e0posure 'rafts of propose' stan'ar's.b. all members of t#e F&*+ are full remunerate'A serve full timeA an' are in'epen'ent

of an companies or institutions.c. all members of t#e F&*+ possess e0tensive e0perience in financial reporting.'. a majorit of t#e members of t#e F&*+ are CP&s 'ra)n from public practice.

5(. T#e Financial &ccounting *tan'ar's +oar' emplos a


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1. F&*+ Tec#nical +ulletinsa. are similar to F&*+ nterpretations in t#at t#e establis# enforceable stan'ar's un'er

t#e &CP&s Co'e of Professional /t#ics.b. are issue' mont#l b t#e F&*+ to 'eal )it# current topics.c. are not e0pecte' to #ave a significant impact on financial reporting in general an'

provi'e gui'ance )#en it 'oes not conflict )it# an broa' fun'amental accountingprinciple.

'. )ere recentl 'iscontinue' b t#e F&*+ because t#e 'ealt )it# speciali;e' topics#aving little impact on financial reporting in general.

2. T#e purpose of t#e /merging ssues Tas Force is toa. 'evelop a conceptual frame)or as a frame of reference for t#e solution of future

problems.b. lobb t#e F&*+ on issues t#at affect a particular in'ustr.c. 'o researc# on issues t#at relate to long!term accounting problems.'. issue statements )#ic# reflect a consensus on #o) to account for ne) an' unusual

financial transactions t#at nee' to be resolve' ?uicl.

3. T#e &merican nstitute of Certifie' Public &ccountants 6&CP&7 continues to be involve' inall of t#e follo)ing e?#e$ta. 'eveloping an' enforcing professional et#ics.b. 'eveloping au'iting stan'ar's for public companies.c. provi'ing professional e'ucation programs.'. &ll of t#e ans)er c#oices are correct.

P4. B#ic# of t#e follo)ing pronouncements )ere issue' b t#e &ccounting Principles +oar'a. &ccounting esearc# +ulletinsb. &P+ Opinionsc. &P+ *tatements of Position

'. *tatements of Financial &ccounting Concepts

5. B#ic# of t#e follo)ing organi;ations #as not been instrumental in t#e 'evelopment offinancial accounting stan'ar's in t#e "nite' *tatesa. &CP&b. F&*+c. &*+'. */C

. B#ic# of t#e follo)ing organi;ations #as notpublis#e' accounting stan'ar'sa. &merican nstitute of Certifie' Public &ccountants.b. *ecurities an' /0c#ange Commission.

c. Financial &ccounting *tan'ar's +oar'.'. &ll of t#ese #ave publis#e' accounting stan'ar's.

$. T#e purpose of *tatements of Financial &ccounting Concepts is toa. establis# -&&P.b. mo'if or e0ten' an e0isting F&*+ &ccounting *tan'ar's "p'ate.c. form a conceptual frame)or for solving e0isting an' emerging problems.'. 'etermine t#e nee' for F&*+ involvement in an emerging issue.

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P%. embers of t#e Financial &ccounting *tan'ar's +oar' area. emploe' b t#e &merican nstitute of Certifie' Public &ccountants 6&CP&7.b. part!time emploees.c. re?uire' to #ol' a CP& certificate.'. in'epen'ent of an ot#er organi;ation.

P(. T#e follo)ing are part of t#e


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$5. B#at is t#e purpose of a F&*+ *taff Positiona. Provi'e interpretation of e0isting stan'ar's.b. Provi'e a consensus on #o) to account for ne) an' unusual financial transactions.c. Provi'e interpretive gui'ance.'. Provi'e timel gui'ance on select issues.

$. B#ic# of t#e follo)ing is notconsi'ere' a component of generall accepte' accountingprinciplesa. F&*+ mplementation -ui'es.b. Bi'el recogni;e' in'ustr practices.c. &rticles publis#e' in CP& journals.'. &CP& &ccounting nterpretations.

$$. Financial accounting stan'ar'!setting in t#e "nite' *tatesa. can be 'escribe' as a social process )#ic# reflects political actions of various

intereste' user groups as )ell as a pro'uct of researc# an' logic.b. is base' solel on researc# an' empirical fin'ings.c. is a legalistic process base' on rules promulgate' b governmental agencies.'. is 'emocratic in t#e sense t#at a majorit of accountants must agree )it# a stan'ar'

before it becomes enforceable.

$%. T#e purpose of t#e nternational &ccounting *tan'ar's +oar' is toa. issue enforceable stan'ar's )#ic# regulate t#e financial accounting an' reporting of

multinational corporations.b. 'evelop a uniform currenc in )#ic# t#e financial transactions of companies t#roug#!

out t#e )orl' )oul' be measure'.c. promote uniform accounting stan'ar's among countries of t#e )orl'.'. arbitrate accounting 'isputes bet)een au'itors an' international companies.

$(. B#ic# of t#e follo)ing is a source of pressure t#at ma influence t#e accounting stan'ar'setting processa. Congress.b. :obbist.c. CP& firms.'. &ll of t#ese ans)ers are correct.

%,. B#at is a possible 'anger if politics plas too big a role in accounting stan'ar' settinga. &ccounting stan'ar's t#at are not trul generall accepte'.b. n'ivi'uals ma influence t#e stan'ar's.c. "ser groups become active.

'. T#e F&*+ 'elegates its aut#orit to electe' officials.

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%1. B#at is t#e


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E0ERCISES

E?% 1&;8GObjective of financial reporting.

B#at is t#e objective of financial reporting Eo) 'o general!purpose financial statements #elpmeet t#is objective.

Solution 1&;8

T#e objective of financial reporting is to provi'e financial information about t#e reporting entitt#at is useful to present an' potential e?uit investorsA len'ersA an' ot#er cre'itors in 'ecisionsabout provi'ing resources to t#e entit.

-eneral!purpose financial statements provi'e financial reporting information to a )i'e variet ofusers. T#e #elp s#are#ol'ersA cre'itorsA emploeesA an' regulators to better un'erstan' acompans financial position an' relate' performance.

E?% 1&;9GDevelopment of accounting principles.

Presente' belo) are t#ree in'epen'entA unrelate' statements regar'ing t#e formulation ofgenerall accepte' accounting principles. /ac# statement contains some incorrect or 'ebatablestatement6s7.

*tatement

T#e users of financial accounting statements #ave coinci'ing an' conflicting nee's for

statements of various tpes. To meet t#ese nee'sA an' to satisf t#e financial reportingresponsibilit of managementA accountants prepare 'ifferent sets of financial statements for'ifferent users.

*tatement

T#e F&*+ s#oul' be responsive to t#e nee's an' vie)points of t#e entire economic communitAnot just t#e public accounting profession. T#e F&*+ t#erefore )ill succee' because it )ill 'ealeffectivel )it# all intereste' groups.

*tatement

T#e *ecurities an' /0c#ange Commission is ver concerne' about financial reporting an' #asformulate' a committee calle' t#e &ccounting *tan'ar's /0ecutive Committee 6&c*/C7. T#is )illprovi'e input to t#e F&*+. n a''itionA after eac# F&*+ *tatement is issue'A t#e &c*/C issues*tatements of Position stating its position on t#e F&*+ statement.

Instru#tions/valuate eac# of t#e in'epen'ent statements an' i'entif t#e areas of fallacious reasoning ineac#. /0plain )# t#e reasoning is incorrect. Complete our 'iscussion of eac# statement beforeprocee'ing to t#e ne0t statement.

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Solution 1&;9

*tatement

t is true t#at users of financial accounting statements #ave coinci'ing an' conflicting nee's for

statements of various tpes. Eo)everA to meet t#ese nee'sA accountants generall prepare asingle set of general!purpose financial statementsA rat#er t#an a number of 'ifferent tpes offinancial statements. t ma be argue' t#at accountants often 'o prepare special statements forparticular purposesA but in general t#e accounting profession #as relie' on general purposefinancial statements prepare' in conformance )it# generall accepte' accounting principles.

*tatement

t is true t#at t#e F&*+ s#oul' be responsive to t#e nee's of t#e entire economic communitA notjust t#e public accounting profession. Eo)everA it is not clear )#et#er t#e F&*+ )ill succee'. T#eF&*+ )ill #ave t#e best c#ance of survival if it 'eals )it# problems promptlA sets properprioritiesA taes )#atever action it t#ins is rig#t an' in t#e public interestA an' #an'les pressures

responsibl )it#out overreacting to t#em.

*tatement

T#e &ccounting *tan'ar's /0ecutive Committee 6&c*/C7 )as establis#e' )it#in t#e &mericannstitute of Certifie' Public &ccountantsA not t#e *ecurities an' /0c#ange CommissionA torespon' to pronouncements of t#e F&*+. T#e &c*/C 'oes issue *tatements of PositionA butissues t#em before t#e F&*+ sets stan'ar's on t#e issue.

E?% 1&;:GPublications an' organi;ations.

*ignificant accounting publications are liste' belo) 61!%7. *ources or sponsors of accounting

publications are i'entifie' ne0t b alp#abetical c#aracter 6a!e7. atc# t#e publications )it# t#eirsources.

Publications

HHHHH 1. &ccounting esearc# +ulletins 61(53!1(5(7

HHHHH 2. &ccounting *tan'ar's "p'ates

HHHHH 3. *tatements of Position 6*OPs7

HHHHH 4. *tatements of Financial &ccounting Concepts

HHHHH 5. Opinions 61(2!1($37

*ourcesI*ponsors

a. Financial &ccounting *tan'ar's +oar' '. Committee on &ccounting Proce'ureb. &ccounting *tan'ar's /0ecutive Committee e. &ccounting Principles +oar'c. T#e &CP&

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Solution 1&;:

1. ' 4. a2. a 5. e3. b

E?% 1&;;GF&*+.

T#e Financial &ccounting *tan'ar's +oar' )as establis#e' because man groups intereste' infinancial reporting believe' t#at t#e &ccounting Principles +oar' )as not effective. Discuss t#eapparent a'vantages t#at t#e F&*+ s#oul' #ave over its earlier counterpartA t#e &P+.

Solution 1&;;

1. *maller members#ip. T#e F&*+ is compose' of seven membersA replacing t#e relativellarge 1%!member &P+.

2. Full!timeA remunerate' members#ip. F&*+ members are )ell!pai'A full!time membersA

appointe' for rene)able five!ear terms. T#e &P+ members )ere unpai' an' part!time.

3. -reater autonom. T#e &P+ )as a senior committee of t#e &CP&A )#ereas t#e F&*+ is notpart of an single professional organi;ation. t is appointe' b an' ans)erable onl to t#eFinancial &ccounting Foun'ation.

4. ncrease' in'epen'ence. T#e &P+ members retaine' t#eir private positions )it# firmsAcompaniesA or institutions. T#e F&*+ members must sever all suc# ties.

5. +roa'er representation. &ll &P+ members )ere re?uire' to be CP&s an' members of t#e&CP&. CurrentlA it is not necessar to be a CP& to be a member of t#e F&*+.

E?% 1&;


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IFRS 5UESTIONS

True@False

1. F* inclu'es bot# nternational Financial eporting *tan'ar's an' nternational &ccounting*tan'ar's.

2. nternational Financial eporting *tan'ar's prece'e' nternational &ccounting *tan'ar's

3. T#e stan'ar'!setting structure use' b t#e nternational &ccounting *tan'ar's +oar' is versimilar to t#at use' b t#e Financial &ccounting *tan'ar's +oar'.

4. T#e rules!base' stan'ar's of F* are more 'etaile' t#an t#e simplerA principles!base'stan'ar's of ".*. -&&P.

5. T#e nternational &ccounting *tan'ar's +oar' #as seven members.

. T#e internal control stan'ar's applicable to *arbanesJO0le 6*OK7 appl onl to large publiccompanies liste' on ".*. e0c#anges.

Ans(ers to True@False questions1. True2. False3. True4. False5. False. True

)ulti$le Coi#e

$. &ut#oritative stan'ar's for F* inclu'e>a. nternational Financial eporting *tan'ar's onl.b. nternational Financial eporting *tan'ar's an' nternational &ccounting *tan'ar's onl.c. nternational Financial eporting *tan'ar'sA nternational &ccounting *tan'ar's an' ".*.

-&&P onl.'. nternational Financial eporting *tan'ar'sA nternational &ccounting *tan'ar's an' an

-&&P stan'ar' recogni;e' b an organi;e' stoc e0c#ange.

%. B#ic# of t#ese statements regar'ing t#e F* an' ".*. -&&P is correcta. ".*. -&&P is consi'ere' to be


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1,. B#ic# of t#e follo)ing organi;ations #ave committe' to 'evelop #ig#!?ualitA compatibleaccounting stan'ar's t#at coul' be use' for 'omestic an' cross!bor'er financial reportinga. T#e Financial &ccounting *tan'ar's +oar' 6F&*+7 an' t#e nternational Organi;ation of

*ecurities Commission 6O*CO7b. T#e Financial &ccounting *tan'ar's +oar' 6F&*+7 an' t#e nternational &ccounting

*tan'ar's +oar' 6&*+7c. T#e nternational &ccounting *tan'ar's +oar' 6&*+7 an' nternational Organi;ation of

*ecurities Commission 6O*CO7'. T#e nternational &ccounting *tan'ar's +oar' 6&*+7 an' t#e *tan'ar's &'visor Council

6*&C7

11. B#ic# of t#e follo)ing organi;ations is not among t#e four international stan'ar'!settingorgani;ationsa. T#e nternational &ccounting *tan'ar's Committee Foun'ation 6&*CF7b. T#e *tan'ar's &'visor Council 6*&C7c. T#e nternational Financial eporting nterpretations Committee 6FC7'. T#e Financial /0ecutives nstitute 6F/7

12. B#ic# of t#e follo)ing organi;ations selects members for t#e &*+a. T#e &ccounting *tan'ar's Committee Foun'ationb. T#e *tan'ar's &'visor Councilc. T#e nternational Financial eporting nterpretations Committee'. T#e nternational &ccounting *tan'ar's Committee Foun'ation

13. T#e &*+ consists of HHHHHHHHH part!time members.a. sevenb. t)oc. t#ree'. five

14. T#e purpose of t#e nternational &ccounting *tan'ar's +oar' is to>a. regulate stoc prices at t#e international level.b. 'evelop a uniform currenc in )#ic# t#e financial transactions occur.c. 'evelop a single set of #ig#!?ualit financial reporting stan'ar's.'. arbitrate accounting 'isputes bet)een au'itors an' international companies.

Ans(ers to )ulti$le Coi#e$. b 11. '%. c 12. '(. c 13. b

1,. b 14. c

Sort Ans(er15. B# )oul' it be a'vantageous for ".*. -&&P an' nternational -&&P to be t#e same

elevant an' reliable financial information is a necessit for viable capital marets."nfortunatelA financial statements from companies outsi'e t#e "nite' *tates are oftenprepare' using 'ifferent principles t#an ".*. -&&P. &s a resultA international companies #aveto 'evelop financial information in 'ifferent )as. +eon' t#e a''itional costs t#esecompanies incurA users of financial statements are often force' to un'erstan' at least t)osets of -&&P. t is not surprising t#at t#ere is a gro)ing 'eman' for one set of #ig# ?ualitinternational stan'ar's.

1 & /=


21/21


1. B#at is t#e 'ifference bet)een principles!base' an' rules!base' accounting rules s F*more principles!base' t#an ".*. -&&P /0plain.

Principles!base' rules are consi'ere' to be base' on accounting principles to result infinancial statements t#at are presente'. ules!base' stan'ar's are generall ?uite 'etaile'Aan' in man instances follo) a 8c#ec!bo09 mentalit t#at some conten' ma s#iel' au'itorsan' companies from legal liabilit. +ecause F* ten's to be simpler an' less stringent in itsaccounting an' 'isclosure re?uirementsA it is generall consi'ere' more principles!base't#an ".*. -&&P.

1 & /1

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Intermediate accounting Ch1 Test Bank