Question 1

The Framework identifies two aspects to financial information that is "relevant". These arE.

Accepted Answer

A) verifiability and understandability. 
B)  predictability and verifiability. 
C)  neutrality and verifiability. 
D) prudence and neutrality. 
E)  comparability and verifiability. 
A) verifiability and understandability. 
B)  predictability and verifiability. 
C)  neutrality and verifiability. 
D) prudence and neutrality. 
E)  comparability and verifiability.

Question 2

Relevance and reliability characteristics are placed as overriding qualities of financial statements over other qualitative characteristics:

Accepted Answer

A) True 
 B)False

Question 3

A central goal in establishing a conceptual framework of accounting will be to obtain general consensus on:

Accepted Answer

A) the scope and objectives of financial reporting. 
B) the qualitative characteristics that financial information should possess. 
C) what the elements of financial reporting are, including agreement on the characteristics and recognition criteria for assets, liabilities, income, expenses and equity. 
D) All of the given answers. 
E) the scope and objectives of financial reporting and the qualitative characteristics that financial information should possess. 
A) the scope and objectives of financial reporting. 
B) the qualitative characteristics that financial information should possess. 
C) what the elements of financial reporting are, including agreement on the characteristics and recognition criteria for assets, liabilities, income, expenses and equity. 
D) All of the given answers. 
E) the scope and objectives of financial reporting and the qualitative characteristics that financial information should possess.

Question 4

The Framework adopts which approach to determining profits.

Accepted Answer

A) Revenue/expense approach. 
B) Matching principle approach. 
C) Asset/liability approach. 
D)  Cash basis approach. 
E)  None of the given answers 
A) Revenue/expense approach. 
B) Matching principle approach. 
C) Asset/liability approach. 
D)  Cash basis approach. 
E)  None of the given answers

Question 5

When an AASB standard conflicts with the Framework, the former prevails:

Accepted Answer

A) True 
 B)False

Question 6

The audit of the financial reports of Matilda Ltd had been completed except for the outcome of a material contingent liability that is still subject to the outcome of a court decision. The case is still ongoing and but it is expected that a decision will be made after three months. The deadline for submitting the financial reports is next month. Which action is consistent with the notion of "timeliness" in the preparation of financial reports?

Accepted Answer

A)  Matilda Ltd should wait for the court decision to be completed before releasing the financial reports as the amount of the liability is material. 
B)  Matilda Ltd should release the financial report on or before the deadline but exclude the contingent liability from the report as the outcome is still uncertain. 
C) Matilda Ltd should release the financial report on or before the deadline but disclose the contingent liability in the notes to the accounts. 
D)  Matilda Ltd must wait for the court decision to be completed before releasing the financial reports as it is expected to occur in the near future anyway (i.e. three months). 
E)  None of the given answers. 
A)  Matilda Ltd should wait for the court decision to be completed before releasing the financial reports as the amount of the liability is material. 
B)  Matilda Ltd should release the financial report on or before the deadline but exclude the contingent liability from the report as the outcome is still uncertain. 
C) Matilda Ltd should release the financial report on or before the deadline but disclose the contingent liability in the notes to the accounts. 
D)  Matilda Ltd must wait for the court decision to be completed before releasing the financial reports as it is expected to occur in the near future anyway (i.e. three months). 
E)  None of the given answers.

Question 7

The objective of financial statements is to provide future oriented information to help investors make business decisions:

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statement(s) is/are true of the qualitative characteristic "comparability"?

Accepted Answer

A)  A financial report must show corresponding results for the preceding period. 
B)  A financial report must be presented in a consistent manner, hence, an entity must adopt similar accounting policies from period to period even though a more reliable and relevant alternative exist. 
C) A financial report must contain all material and relevant items. 
D) All of the given answers. 
E)  A financial report must show corresponding results for the preceding period and be presented in a consistent manner, hence, an entity must adopt similar accounting policies from period to period even though a more reliable and relevant alternative exist. 
A)  A financial report must show corresponding results for the preceding period. 
B)  A financial report must be presented in a consistent manner, hence, an entity must adopt similar accounting policies from period to period even though a more reliable and relevant alternative exist. 
C) A financial report must contain all material and relevant items. 
D) All of the given answers. 
E)  A financial report must show corresponding results for the preceding period and be presented in a consistent manner, hence, an entity must adopt similar accounting policies from period to period even though a more reliable and relevant alternative exist.

Question 9

Consider the following information:
   
You are an accountant for both firms and would like to determine whether the impairment loss is material or not. Which of the following statement(s) is/are correct?
1. The impairment loss for both firms is material.
2. The impairment loss for Manly Ltd is material.
3. The impairment loss for Mosman Ltd is material.
4. The impairment loss for both firms is immaterial.
5. None of the given answers.

Accepted Answer

The answer of Consider the following information:
   
You...

Question 10

The AASB Framework serves as a guide to the Australian Accounting Standards Board (AASB) in developing accounting standards:

Accepted Answer

A) True 
 B)False

Question 11

When a standard restricts the number of accounting methods to be used to account for a particular accounting issue, it is promoting the qualitative characteristic of ______________?

Accepted Answer

A) Timeliness 
B)  Prudence 
C)  Understandability 
D)  Comparability 
E)  Relevance 
A) Timeliness 
B)  Prudence 
C)  Understandability 
D)  Comparability 
E)  Relevance

Question 12

Which of the following statement(s) is/are true of general-purpose financial reports?

Accepted Answer

A)  General purpose financial reports should be prepared by all reporting entities. 
B)  General-purpose financial reports are reports that comply with statements of accounting concepts and accounting standards. 
C)  General-purpose financial reports are intended to meet the information needs common to users who are able to command the preparation of reports. 
D)  All of the given answers. 
E) General purpose financial reports should be prepared by all reporting entities and general-purpose financial reports are reports that comply with statements of accounting concepts and accounting standards. 
A)  General purpose financial reports should be prepared by all reporting entities. 
B)  General-purpose financial reports are reports that comply with statements of accounting concepts and accounting standards. 
C)  General-purpose financial reports are intended to meet the information needs common to users who are able to command the preparation of reports. 
D)  All of the given answers. 
E) General purpose financial reports should be prepared by all reporting entities and general-purpose financial reports are reports that comply with statements of accounting concepts and accounting standards.

Question 13

SAC 2 (Objectives of General Purpose Financial Reporting) requires that general-purpose financial reports disclose information that is:

Accepted Answer

A)  Relevant to the assessment of profit, funding and investing, and compliance. 
B)  Relevant to the assessment of financial and social performance, financial position and funding and investing and includes information about compliance. 
C) Relevant to the assessment of performance, financial position and funding and investing, including information about compliance. 
D)  Relevant to the assessment of performance, financial position and cash flows. 
E)  None of the given answers. 
A)  Relevant to the assessment of profit, funding and investing, and compliance. 
B)  Relevant to the assessment of financial and social performance, financial position and funding and investing and includes information about compliance. 
C) Relevant to the assessment of performance, financial position and funding and investing, including information about compliance. 
D)  Relevant to the assessment of performance, financial position and cash flows. 
E)  None of the given answers.

Question 14

The Framework's recognition criteria provides that "an asset is recognised in the balance sheet when it is ________ that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured __________.

Accepted Answer

A)  possible; reliably. 
B)  probable; accurately. 
C)  probable; reliably. 
D)  certain; accurately. 
E) None of the given answers. 
A)  possible; reliably. 
B)  probable; accurately. 
C)  probable; reliably. 
D)  certain; accurately. 
E) None of the given answers.

Question 15

Bowen Pty Ltd is a small proprietary company with seven directors. Four of the seven directors own 75% of the ordinary shares and the remaining shares are owned by family members of the directors. The company also has 15 trade creditors and an open line of credit with one state bank. Is Bowen Pty Ltd a reporting entity and hence required to prepare general-purpose financial reports?

Accepted Answer

A)  Yes, because dependent users of exist. 
B) Yes, because there are trade creditors who are external users. 
C)  No, because it is a small proprietary firm. 
D)  No, because there are no obvious users who are unable to command the preparation of information from the entity. 
E)  None of the given answers. 
A)  Yes, because dependent users of exist. 
B) Yes, because there are trade creditors who are external users. 
C)  No, because it is a small proprietary firm. 
D)  No, because there are no obvious users who are unable to command the preparation of information from the entity. 
E)  None of the given answers.

Question 16

Social accountability is considered in the Framework as part of the objectives of general-purpose financial reports.

Accepted Answer

A) True 
 B)False

Question 17

What guidelines are available in AASB 1031 "Materiality" to assist in determining the materiality of an item?

Accepted Answer

A) If the amount is equal or greater than 10% of the appropriate base amount, the item is material. 
B)  If the amount is equal or greater than 10% of the appropriate base amount, the item is immaterial. 
C)  If the amount is equal or less than 5% of the appropriate base amount, the item is material 
D)  If the amount is equal or less than 5% of the appropriate base amount, the item is immaterial. 
E)  If the amount is equal or greater than 10% of the appropriate base amount, the item is material; if the amount is equal or less than 5% of the appropriate base amount, the item is immaterial. 
A) If the amount is equal or greater than 10% of the appropriate base amount, the item is material. 
B)  If the amount is equal or greater than 10% of the appropriate base amount, the item is immaterial. 
C)  If the amount is equal or less than 5% of the appropriate base amount, the item is material 
D)  If the amount is equal or less than 5% of the appropriate base amount, the item is immaterial. 
E)  If the amount is equal or greater than 10% of the appropriate base amount, the item is material; if the amount is equal or less than 5% of the appropriate base amount, the item is immaterial.

Question 18

Which of the following accounting policies is an example of a trade-off between relevance and reliability?

Accepted Answer

A)  Research outflows are expensed and development activities expenses are capitalized. 
B) Biological assets are stated at fair value unless the fair value cannot be measured reliably. 
C)  Machinery and equipment are reviewed periodically to assess propriety of useful life estimations used in depreciation. 
D) All of the given answers. 
E)  None of the given answers. 
A)  Research outflows are expensed and development activities expenses are capitalized. 
B) Biological assets are stated at fair value unless the fair value cannot be measured reliably. 
C)  Machinery and equipment are reviewed periodically to assess propriety of useful life estimations used in depreciation. 
D) All of the given answers. 
E)  None of the given answers.

Question 19

The Framework defines principles for a specific accounting recognition, measurement and disclosure matter:

Accepted Answer

A) True 
 B)False

Question 20

For the preparation and presentation of financial statements, Australia adopts the IASB Framework and the Statement of Accounting Concepts 1 to 4.

Accepted Answer

A) True 
 B)False

Exam 2: The Conceptual Framework of Accounting and Its Relevance to Financ

The Framework identifies two aspects to financial information that is "relevant". These arE.

Relevance and reliability characteristics are placed as overriding qualities of financial statements over other qualitative characteristics:

A central goal in establishing a conceptual framework of accounting will be to obtain general consensus on:

The Framework adopts which approach to determining profits.

When an AASB standard conflicts with the Framework, the former prevails:

The objective of financial statements is to provide future oriented information to help investors make business decisions:

Which of the following statement(s) is/are true of the qualitative characteristic "comparability"?

The AASB Framework serves as a guide to the Australian Accounting Standards Board (AASB) in developing accounting standards:

When a standard restricts the number of accounting methods to be used to account for a particular accounting issue, it is promoting the qualitative characteristic of ______________?

Which of the following statement(s) is/are true of general-purpose financial reports?

SAC 2 (Objectives of General Purpose Financial Reporting) requires that general-purpose financial reports disclose information that is:

The Framework's recognition criteria provides that "an asset is recognised in the balance sheet when it is ________ that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured __________.

Social accountability is considered in the Framework as part of the objectives of general-purpose financial reports.

What guidelines are available in AASB 1031 "Materiality" to assist in determining the materiality of an item?

Which of the following accounting policies is an example of a trade-off between relevance and reliability?

The Framework defines principles for a specific accounting recognition, measurement and disclosure matter:

For the preparation and presentation of financial statements, Australia adopts the IASB Framework and the Statement of Accounting Concepts 1 to 4.

An Overview of the Australian External Reporting Environment

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluation and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Lease

Set-Off and Extinguishment of Debt

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in E

Accounting for Share-Based Payments

Accounting for Income Taxes

Cash-Flow Statements

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After Balance Sheet Date

Segment Reporting

Related-Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transact

Further Consolidation Issues Ii: Accounting for Minority Interests

Further Consolidation Issues Iii: Accounting for Indirect Ownershi

Further Consolidation Issues Iv: Accounting for Changes in the Deg

Accounting for Equity Investments

Accounting for Equity Investments

Accounting for Foreign Currency Transactions

Translation of the Accounts of Foreign Operations

Accounting for Corporate Social Responsibility

Filters

The Framework's recognition criteria provides that "an asset is recognised in the balance sheet when it is that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured __.