Question 1

Which of the following is true regarding whether IFRS specifically addresses the accounting and reporting for effects of changes in accounting policies?

Accepted Answer

A

Question 2

If a particular transaction is not specifically addressed by IFRS, where should an accountant turn to find a hierarchy of guidance to be considered in the selection of an accounting policy?

Accepted Answer

A) accounting standards from other countries 
B) IAS 8 
C) the company's board of directors 
D) the company's external auditors 
A) accounting standards from other countries 
B) IAS 8 
C) the company's board of directors 
D) the company's external auditors B

Question 3

Counterbalancing errors are those that will be offset and that take longer than two periods to correct themselves.

Accepted Answer

A) True 
 B)False  False

Question 4

The estimated life of a building that has been depreciated 30 years of an originally estimated life of 50 years has been revised to a remaining life of 10 years.Based on this information, the accountant should

Accepted Answer

A) continue to depreciate the building over the original 50-year life. 
B) depreciate the remaining book value over the remaining life of the asset. 
C) adjust accumulated depreciation to its appropriate balance, through net income, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years. 
D) adjust accumulated depreciation to its appropriate balance through retained earnings, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years. 
A) continue to depreciate the building over the original 50-year life. 
B) depreciate the remaining book value over the remaining life of the asset. 
C) adjust accumulated depreciation to its appropriate balance, through net income, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years. 
D) adjust accumulated depreciation to its appropriate balance through retained earnings, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years.

Question 5

Non-counterbalancing errors are those that longer than two periods to correct themselves.

Accepted Answer

A) True 
 B)False

Question 6

Counterbalancing errors do not include

Accepted Answer

A) errors that correct themselves in two years. 
B) errors that correct themselves in three years. 
C) an understatement of purchases. 
D) an overstatement of unearned revenue. 
A) errors that correct themselves in two years. 
B) errors that correct themselves in three years. 
C) an understatement of purchases. 
D) an overstatement of unearned revenue.

Question 7

Retrospective application refers to the application of a different accounting policy to recast previously issued financial statements-as if the new policy had always been used.

Accepted Answer

A) True 
 B)False

Question 8

When a company changes an accounting policy, it should report the change by reporting the cumulative effect of the change in the current year's income statement.

Accepted Answer

A) True 
 B)False

Question 9

One of the disclosure requirements for a change in accounting policy is to show the cumulative effect of the change on retained earnings as of the beginning of the earliest period presented.

Accepted Answer

A) True 
 B)False

Question 10

The IASB has declared, as part of its conceptual framework, that it will assess the merits of proposed standards

Accepted Answer

A) from a position of neutrality. 
B) from a position of materiality. 
C) based on the possible impact on behavior. 
D) based on lobbyist arguments. 
A) from a position of neutrality. 
B) from a position of materiality. 
C) based on the possible impact on behavior. 
D) based on lobbyist arguments.

Question 11

The accounting for change in estimates differs between U.S.GAAP and IFRS.

Accepted Answer

A) True 
 B)False

Question 12

Accounting changes are often made and the monetary impact is reflected in the financial statements of a company even though, in theory, this may be a violation of the accounting concept of

Accepted Answer

A) materiality. 
B) consistency. 
C) prudence. 
D) objectivity. 
A) materiality. 
B) consistency. 
C) prudence. 
D) objectivity.

Question 13

Under IFRS, when a company prepares financial statements on a new basis, how many years of comparative data are reported?

Accepted Answer

A) One 
B) Two 
C) Three 
D) Five 
A) One 
B) Two 
C) Three 
D) Five

Question 14

Why does IASB prohibit retrospective treatment of changes in accounting estimates?

Accepted Answer

A) The IASB view changes in estimates as normal recurring corrections and adjustments, which are the natural result of the accounting process. 
B) The IASB does not allow the retrospective treatment for any type of presentation. 
C) The IASB prohibits retrospective treatment of changes in accounting estimates because IFRS requires it. 
D) IASB does not prohibit retrospective treatment of changes in accounting estimates, but is silent on this issue 
A) The IASB view changes in estimates as normal recurring corrections and adjustments, which are the natural result of the accounting process. 
B) The IASB does not allow the retrospective treatment for any type of presentation. 
C) The IASB prohibits retrospective treatment of changes in accounting estimates because IFRS requires it. 
D) IASB does not prohibit retrospective treatment of changes in accounting estimates, but is silent on this issue

Question 15

Which of the following statements is correct?

Accepted Answer

A) Changes in accounting policy are always handled in the current or prospective period. 
B) Prior statements should be restated for changes in accounting estimates. 
C) A change from expensing certain costs to capitalizing these costs due to a change in the period benefited, should be handled as a change in accounting estimate. 
D) Correction of an error related to a prior period should be considered as an adjustment to current year net income. 
A) Changes in accounting policy are always handled in the current or prospective period. 
B) Prior statements should be restated for changes in accounting estimates. 
C) A change from expensing certain costs to capitalizing these costs due to a change in the period benefited, should be handled as a change in accounting estimate. 
D) Correction of an error related to a prior period should be considered as an adjustment to current year net income.

Question 16

All of the following statements are true regarding IASB's guideline that companies must demonstrate change in accounting policy as preferable or as an improvement, except

Accepted Answer

A) Diversity in situations and characteristics of the items encountered in practice require the use of professional judgment. 
B) Changes in accounting policy are appropriate only when a company demonstrates that the newly adopted generally accepted accounting policy is more relevant and reliable than the existing one. 
C) Changes in accounting policy are appropriate only when a company demonstrates an improved income tax effect alone. 
D) All of these statements are true. 
A) Diversity in situations and characteristics of the items encountered in practice require the use of professional judgment. 
B) Changes in accounting policy are appropriate only when a company demonstrates that the newly adopted generally accepted accounting policy is more relevant and reliable than the existing one. 
C) Changes in accounting policy are appropriate only when a company demonstrates an improved income tax effect alone. 
D) All of these statements are true.

Question 17

Accounting errors include changes in estimates that occur because a company acquires more experience, or as it obtains additional information.

Accepted Answer

A) True 
 B)False

Question 18

The IASB is silent on the application of the direct effects of a change in accounting policy.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is (are) the proper time period(s) to record the effects of a change in accounting estimate?

Accepted Answer

A) Current period and prospectively 
B) Current period and retrospectively 
C) Retrospectively only 
D) Current period only 
A) Current period and prospectively 
B) Current period and retrospectively 
C) Retrospectively only 
D) Current period only

Question 20

Which of the following is accounted for as a change in accounting policy?

Accepted Answer

A) A change in the estimated useful life of plant assets. 
B) A change from the cash basis of accounting to the accrual basis of accounting. 
C) A change from expensing immaterial expenditures to deferring and amortizing them as they become material. 
D) A change in inventory valuation from average cost to FIFO. 
A) A change in the estimated useful life of plant assets. 
B) A change from the cash basis of accounting to the accrual basis of accounting. 
C) A change from expensing immaterial expenditures to deferring and amortizing them as they become material. 
D) A change in inventory valuation from average cost to FIFO.

Exam 22: Accounting Changes and Error Analysis

Which of the following is true regarding whether IFRS specifically addresses the accounting and reporting for effects of changes in accounting policies?

If a particular transaction is not specifically addressed by IFRS, where should an accountant turn to find a hierarchy of guidance to be considered in the selection of an accounting policy?

Counterbalancing errors are those that will be offset and that take longer than two periods to correct themselves.

The estimated life of a building that has been depreciated 30 years of an originally estimated life of 50 years has been revised to a remaining life of 10 years.Based on this information, the accountant should

Non-counterbalancing errors are those that longer than two periods to correct themselves.

Counterbalancing errors do not include

Retrospective application refers to the application of a different accounting policy to recast previously issued financial statements-as if the new policy had always been used.

When a company changes an accounting policy, it should report the change by reporting the cumulative effect of the change in the current year's income statement.

One of the disclosure requirements for a change in accounting policy is to show the cumulative effect of the change on retained earnings as of the beginning of the earliest period presented.

The IASB has declared, as part of its conceptual framework, that it will assess the merits of proposed standards

The accounting for change in estimates differs between U.S.GAAP and IFRS.

Accounting changes are often made and the monetary impact is reflected in the financial statements of a company even though, in theory, this may be a violation of the accounting concept of

Under IFRS, when a company prepares financial statements on a new basis, how many years of comparative data are reported?

Why does IASB prohibit retrospective treatment of changes in accounting estimates?

Which of the following statements is correct?

All of the following statements are true regarding IASB's guideline that companies must demonstrate change in accounting policy as preferable or as an improvement, except

Accounting errors include changes in estimates that occur because a company acquires more experience, or as it obtains additional information.

The IASB is silent on the application of the direct effects of a change in accounting policy.

Which of the following is (are) the proper time period(s) to record the effects of a change in accounting estimate?

Which of the following is accounted for as a change in accounting policy?

Financial Reporting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Statement of Financial Position and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities, Provisions, and Contingencies

Non-Current Liabilities

Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Statement of Cash Flows

Presentation and Disclosure in Financialreporting

Filters