Exam 3: Judgment and Applied Financial Accounting Research

Tracy Smith is researching a financial reporting issue. She did not find guidance for the specific transaction in the Accounting Standards Codification. Briefly explain how she should proceed in resolving her accounting research question.

Depreciation expense is based on estimates of ________.

U.S. GAAP includes all of the following except ________.

Which of the following is most likely based on an assumption?

Emily Bradly is part of a team at work that has been charged with the responsibility of researching differences between IFRS and U.S. GAAP. The team reaches a consensus on a given topic that Emily does not agree with. Not wanting to enter into a conflict, Emily agrees with the group. What type of bias is represented in the in the above scenario?

When the FASB issues a new pronouncement, it is referred to as an ________.

Accountants must often use judgment when deciding when to recognize revenue.

Failure to consider all reasonable alternatives when reaching a group consensus, in an attempt to avoid conflict is an example of ________.

Financial statement users can look to the ________ to determine whether a company uses income-increasing or income-reducing accounting policies.

Weighting one piece of information more heavily than others is an example of ________.

You just got hired to do accounting for Starlight Espresso, which is a boutique coffee production company. The owner approaches you and says that he's concerned about the crops this year, because he heard that many of them could be ruined because of a disease affecting the shrubs this year. If the supply is limited, he fears prices will go up; however, he said his friend told him he should look into futures contracts. He would like you to find out if this can help save the company money, and also explain to him what a futures contract is. Eager to impress the owner, you decide to put your accounting research skills to use. How would you approach the first two steps of the research process given the information in this problem?

Failing to consider all relevant data, and just using the information most readily available or easily recalled is known as ________.

In step five of the financial accounting research process, the accountant will ________.

When compared to U.S. GAAP, IFRS requires that companies disclose additional information about assumptions and estimates made at the end of the reporting period.

Cognitive biases can impede an accountant's use of good judgment.

Identify the level of the U.S. GAAP Literature Hierarchy that each item belongs to. Authoritative Literature Level Textbooks SEC rules and interpretive releases Authoritative rules and principles from U.S. GAAP for similar transactions

Questions such as "Which parties are involved?" and "What is the timing of the transaction?" would first be addressed in which step of the financial accounting research process?

To mitigate cognitive biases, accountants must be as ________ as possible.

In the Accounting Standards Codification, the subtopic numbers under each topic are uniform throughout the Codification.

An attitude that includes a questioning mind and a critical assessment of audit evidence is known as ________.