Question 1

The key characteristics of an asset as defined in the Conceptual Framework include:

Accepted Answer

A) There must be future economic benefits. 
B) The reporting entity must control the future economic benefits. 
C) The asset results from past transactions. 
D) all of the given answers. 
A) There must be future economic benefits. 
B) The reporting entity must control the future economic benefits. 
C) The asset results from past transactions. 
D) all of the given answers. D

Question 2

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) 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) 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

Question 3

The trade-off between relevance and faithful representation requires exercise of judgment constrained by timeliness and costs versus benefits.

Accepted Answer

A) True 
 B)False  True

Question 4

The audit of the financial reports of Matilda Plc 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 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 Plc should wait for the court decision to be completed before releasing the financial reports as the amount of the liability is material. 
B) Matilda Plc 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 Plc should release the financial report on or before the deadline but disclose the contingent liability in the notes to the accounts. 
D) Matilda Plc 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). 
A) Matilda Plc should wait for the court decision to be completed before releasing the financial reports as the amount of the liability is material. 
B) Matilda Plc 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 Plc should release the financial report on or before the deadline but disclose the contingent liability in the notes to the accounts. 
D) Matilda Plc 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).

Question 5

In accordance with IASB Conceptual Framework which of the following is consistent with the definition of income?

Accepted Answer

A) increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants 
B) increases in economic benefits during the accounting period in the form of inflows other than those relating to contributions from equity participants 
C) increases in economic benefits during the accounting period in the form of cash inflows or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants 
D) All of the given answers are correct. 
A) increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants 
B) increases in economic benefits during the accounting period in the form of inflows other than those relating to contributions from equity participants 
C) increases in economic benefits during the accounting period in the form of cash inflows or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants 
D) All of the given answers are correct.

Question 6

Discuss the benefits of a conceptual framework

Accepted Answer

A conceptual framework provides a struct

Question 7

With the convergence project between IASB and FASB explain why there is a need for a revised conceptual framework.

Accepted Answer

The convergence project between the Inte

Question 8

In accordance with IASB Conceptual Framework which of the following accounts are expenses?

Accepted Answer

A) dividends paid 
B) provision for warranties 
C) entity dumps pollutants in a river adjacent to its factory 
D) None of the given answers are correct. 
A) dividends paid 
B) provision for warranties 
C) entity dumps pollutants in a river adjacent to its factory 
D) None of the given answers are correct.

Question 9

The Conceptual framework identified some constraints that preparers should consider in the preparation of financial reports.Identify and discuss these constraints.

Accepted Answer

The Conceptual Framework for Financial R

Question 10

Which of the following items is not considered an asset?

Accepted Answer

A) patents 
B) research expenses of an R&D project 
C) equipment under lease where the risks and rewards flows into the entity 
D) research expenses of an R&D project and equipment under lease where the risks and rewards flows into the entity 
A) patents 
B) research expenses of an R&D project 
C) equipment under lease where the risks and rewards flows into the entity 
D) research expenses of an R&D project and equipment under lease where the risks and rewards flows into the entity

Question 11

Relevance and faithfully represented characteristics are placed as overriding qualities of financial statements over other qualitative characteristics

Accepted Answer

A) True 
 B)False

Question 12

What qualities should financial information possess to be faithfully represented?

Accepted Answer

Financial information should possess sev

Question 13

The IASB Conceptual 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 
A) revenue/expense approach 
B) matching principle approach 
C) asset/liability approach 
D) cash basis approach

Question 14

The Blaxland Plc filed a lawsuit against D-Mart Machineries for failure to comply with the specifications of the factory equipment that they ordered and received.The solicitors for Blaxland Plc strongly believe that the company will receive €50 000 to €100 000 if they win the case.Which action is consistent with the Conceptual Framework?

Accepted Answer

A) Blaxland Plc should recognise a receivable of €75 000, the expected value of the gain. 
B) Blaxland Plc should recognise a receivable of €50 000, a conservative estimate of the gain. 
C) Blaxland Plc should not recognise the receivable until it is probable that they have won the case. 
D) Blaxland Plc should not recognise the receivable because while the solicitor is expecting to win the case, the receivable cannot be estimated reliably. 
A) Blaxland Plc should recognise a receivable of €75 000, the expected value of the gain. 
B) Blaxland Plc should recognise a receivable of €50 000, a conservative estimate of the gain. 
C) Blaxland Plc should not recognise the receivable until it is probable that they have won the case. 
D) Blaxland Plc should not recognise the receivable because while the solicitor is expecting to win the case, the receivable cannot be estimated reliably.

Question 15

Which of the following actions best describes the qualitative characteristic 'relevance'?

Accepted Answer

A) The financial report of KMC Plc was audited by one of the Big 4 four accounting firms. 
B) DGC omitted a sales transaction equal to 10.5% of its accounts receivable. 
C) MCB Plc and DGC Plc both use accelerated depreciation method. 
D) GEP Plc did not revalue its intangible assets because it was difficult to obtain the fair value of the assets. 
A) The financial report of KMC Plc was audited by one of the Big 4 four accounting firms. 
B) DGC omitted a sales transaction equal to 10.5% of its accounts receivable. 
C) MCB Plc and DGC Plc both use accelerated depreciation method. 
D) GEP Plc did not revalue its intangible assets because it was difficult to obtain the fair value of the assets.

Question 16

Discuss some of the criticisms of the Conceptual Framework.

Accepted Answer

The Conceptual Framework in accounting h

Question 17

Which of the following transactions does not meet the definition of an asset?

Accepted Answer

A) deposit for purchase of equipment 
B) commitment to purchase equipment 
C) finance leased equipment 
D) purchase of equipment on credit. 
A) deposit for purchase of equipment 
B) commitment to purchase equipment 
C) finance leased equipment 
D) purchase of equipment on credit.

Question 18

Which of the following statement(s)is/are true of the qualitative characteristic 'faithful representation'?

Accepted Answer

A) information that is free from material bias and error 
B) information that faithfully represents what it purports to represent 
C) information that should affect the decisions of financial statement users 
D) information that is free from material bias and error, complete description and that faithfully represents what it purports to represent 
A) information that is free from material bias and error 
B) information that faithfully represents what it purports to represent 
C) information that should affect the decisions of financial statement users 
D) information that is free from material bias and error, complete description and that faithfully represents what it purports to represent

Question 19

Which of the following is/are characteristics of 'comparability'?

Accepted Answer

A) Users must be able to compare the financial reports of an entity with the financial reports of a shareholder. 
B) Users must be able to compare the current financial reports with prior period financial reports of an entity. 
C) Users must be able to compare the financial reports of an entity with the financial reports of another entity. 
D) Users must be able to compare the current financial reports with prior period financial reports of an entity and users must be able to compare the financial reports of an entity with the financial reports of another entity. 
A) Users must be able to compare the financial reports of an entity with the financial reports of a shareholder. 
B) Users must be able to compare the current financial reports with prior period financial reports of an entity. 
C) Users must be able to compare the financial reports of an entity with the financial reports of another entity. 
D) Users must be able to compare the current financial reports with prior period financial reports of an entity and users must be able to compare the financial reports of an entity with the financial reports of another entity.

Question 20

The IASB and US FASB are jointly developing a common conceptual framework because this is necessary for the Convergence Project,which aims to converge two sets of accounting standards.

Accepted Answer

A) True 
 B)False

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

The key characteristics of an asset as defined in the Conceptual Framework include:

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

The trade-off between relevance and faithful representation requires exercise of judgment constrained by timeliness and costs versus benefits.

In accordance with IASB Conceptual Framework which of the following is consistent with the definition of income?

Discuss the benefits of a conceptual framework

With the convergence project between IASB and FASB explain why there is a need for a revised conceptual framework.

In accordance with IASB Conceptual Framework which of the following accounts are expenses?

The Conceptual framework identified some constraints that preparers should consider in the preparation of financial reports.Identify and discuss these constraints.

Which of the following items is not considered an asset?

Relevance and faithfully represented characteristics are placed as overriding qualities of financial statements over other qualitative characteristics

What qualities should financial information possess to be faithfully represented?

The IASB Conceptual Framework adopts which approach to determining profits?

Which of the following actions best describes the qualitative characteristic 'relevance'?

Discuss some of the criticisms of the Conceptual Framework.

Which of the following transactions does not meet the definition of an asset?

Which of the following statement(s)is/are true of the qualitative characteristic 'faithful representation'?

Which of the following is/are characteristics of 'comparability'?

The IASB and US FASB are jointly developing a common conceptual framework because this is necessary for the Convergence Project,which aims to converge two sets of accounting standards.

An Overview of the International External Reporting Environment

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

An Overview of Accounting for Liabilities

Accounting for Leases

Share Capital, Reserves and Share Options Employee Bonus Schemes

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Income Taxes

The Statement of Cash Flows

Events Occurring After the Reporting Date

Related-Party Disclosures

Earnings Per Share

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues III: Accounting for Indirect Ownership Interest

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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