Exam 1: Setting the Stage

What is often the main motivation behind the practice of taking a "big bath" in a loss year?

Which of the following financial statements would likely be the most effective in conveying information to users that will help them to predict the long-term future cash flows of the company?

Which of the following private companies is required to use IFRS?

Which of the following is not one of the major reporting objectives of financial statement preparers?

France,Germany,Japan and Canada are four countries that have adopted International Financial Reporting Standards.As a result,auto companies from these nations will have similar statements,statement components,disclosures and measurement methods. Required: Discuss the "invisible differences" that may cause statements from the different countries to be less comparable and give examples.

Which of the following statements on professional judgment is not true?

What was the main reason for adopting international standards?

Many countries around the world have adopted International Financial Reporting Standards as their accounting standards.As a result,companies competing in the same industry,but operating in different countries should use the same accounting policies.This,in turn,makes interpretation and analysis of peers' statements listed on different exchanges far easier than in the past. Required: Is the above statement true? Explain

XY Co.is a Canadian company listed on a US stock exchange.In the past,the company prepared a set of financial statements under pre-changeover Canadian GAAP and another set under US GAAP.XY Co.converted to IFRS in 2010 for Canadian purposes,but is still considering preparing a second set of statements under US GAAP. Required: What are the current reporting requirements required by the SEC? Should the company be producing two sets of financial statements? Why is there pressure on FASB and the IASB to cooperate in preparing new accounting policy proposals? What do you think FASB will do in the future?

When the International Accounting Standards Board amends a standard,what must a code-law country do to adopt the amendment?

Management prepares the company's financial statements.Consequently,management's objectives will dominate the selection of accounting policies. Required: Give examples of users that might have the power to influence the accounting policy choices made by preparers.

Which of the following statements about income smoothing is true?

Which of the following covenants would not appear in a loan agreement?

Professional judgement is based on criteria that include certain characteristics of accounting.Which of the following is not one of these characteristics?

What effect does income smoothing have on risk analysis?

Which of the following financial reporting objectives is a user objective?

What is one of the main reasons why securities commissions are often ineffective enforcement agencies for accounting standards?

Both Canada and Japan have adopted IFRS even though the two countries differ in many ways.What is one areas in which the two countries differ?

Private companies in Canada may follow either IFRS or accounting standards for private companies. Required: Why did Canada adopt accounting standards for private companies? What is different about private companies and public companies that require a different set of accounting standards? How did the AcSB design these private company accounting standards and why did it choose this option?

Choco Chocolate is the wholly-owned Canadian subsidiary of the Yummy Candy Company,a publicly-traded US company.Which accounting standards must Choco Chocolate comply with?