Question 1

Which of the following statements about IFRS is true?

Accepted Answer

A) IFRS is more rule-based than pre-IFRS GAAP. 
B) IFRS reduces the number of management estimates that can be used. 
C) IFRS requires more judgement in selecting appropriate accounting policies than under pre-IFRS GAAP. 
D) IFRS does not require as strong an accounting infrastructure as under pre-IFRS GAAP. 
A) IFRS is more rule-based than pre-IFRS GAAP. 
B) IFRS reduces the number of management estimates that can be used. 
C) IFRS requires more judgement in selecting appropriate accounting policies than under pre-IFRS GAAP. 
D) IFRS does not require as strong an accounting infrastructure as under pre-IFRS GAAP.

Question 2

Which of the following user groups has the most influence on reporting objectives?

Accepted Answer

A) Canada Revenue Agency 
B) The company's audit committee 
C) The company's major lenders 
D) Industry security analysts 
A) Canada Revenue Agency 
B) The company's audit committee 
C) The company's major lenders 
D) Industry security analysts

Question 3

For international standards to be applied effectively,a country does not require ________.

Accepted Answer

A) professional financial preparers 
B) quality auditors 
C) an independent enforcement agency 
D) companies with ethical managers 
A) professional financial preparers 
B) quality auditors 
C) an independent enforcement agency 
D) companies with ethical managers

Question 4

Which financial reporting objective is common to both users and preparers of financial statements?

Accepted Answer

A) Cash flow prediction 
B) Contract compliance 
C) Income tax deferral 
D) Net income maximization 
A) Cash flow prediction 
B) Contract compliance 
C) Income tax deferral 
D) Net income maximization

Question 5

Sheng Ltd. ,a private company,is seeking financing.Why might it be advantageous for Sheng to use IFRS rather than Accounting Standards for Private Enterprises (ASPE)?

Accepted Answer

A) It is less costly for Sheng to prepare IFRS financial statements. 
B) It will give Sheng the appearance of an international company. 
C) It will lower Sheng's audit fees. 
D) It might enable Sheng to negotiate a lower cost of financing. 
A) It is less costly for Sheng to prepare IFRS financial statements. 
B) It will give Sheng the appearance of an international company. 
C) It will lower Sheng's audit fees. 
D) It might enable Sheng to negotiate a lower cost of financing.

Question 6

High Traders Inc.is a private Canadian company.The company adopted accounting standards for private enterprises early in 2009 since there were few changes required on changeover.However,a new CFO has just been hired and now is suggesting that the company consider adopting IFRS in the near future.
Required:
Outline four possible reasons that a private company in Canada might choose to adopt IFRS.What would be the costs related to changing to IFRS?

Accepted Answer

A private company might decide to later

Question 7

Sharon Peters is a controller is a New Start Co.She has just been informed by her CEO to "make sure that she chooses accounting policies that will have the effect of smoothing income".
Required:
What is meant by "income smoothing"? Why would a company be concerned about smoothing its income? How would income smoothing affect a user's perception of the company's results? Explain how income smoothing can be accomplished.

Accepted Answer

As part of the analysis,investors and cr

Question 8

Sam Stone is a financial analyst currently looking at a set of financial statements.After his review of the company's statements,he concludes that the statements report "high quality earnings".
Required:
Explain what is meant by "high quality earnings".In preparing financial statements that result in high quality earnings,what types of accounting policy choices will preparers normally adopt.

Accepted Answer

"High quality earnings" is a term used b

Question 9

Which financial reporting approach has Canada decided to take with respect to private enterprises?

Accepted Answer

A) IFRS 
B) Special adaptation of IFRS for small and medium enterprises 
C) Canadian GAAP for private enterprises 
D) Disclosed basis of accounting 
A) IFRS 
B) Special adaptation of IFRS for small and medium enterprises 
C) Canadian GAAP for private enterprises 
D) Disclosed basis of accounting

Question 10

What does accounting harmonization refer to?

Accepted Answer

A) The smoothing of income between periods by a company 
B) Achieving a high level of consistency among accounting standards of different countries 
C) All companies using the same accounting standards 
D) Reconciling financial statements prepared under pre-IFRS GAAP to financial statements prepared under IFRS 
A) The smoothing of income between periods by a company 
B) Achieving a high level of consistency among accounting standards of different countries 
C) All companies using the same accounting standards 
D) Reconciling financial statements prepared under pre-IFRS GAAP to financial statements prepared under IFRS

Question 11

A company has chosen accounting policies that result in maximizing its net income.Which of the following is not a reason for doing this?

Accepted Answer

A) To comply with loan agreement maintenance tests 
B) For favourable performance evaluation 
C) For cash flow prediction 
D) To attract new investors 
A) To comply with loan agreement maintenance tests 
B) For favourable performance evaluation 
C) For cash flow prediction 
D) To attract new investors

Question 12

A company has chosen accounting policies that result in minimizing its net income.Which of the following is not a reason for doing this?

Accepted Answer

A) Income tax deferral 
B) Performance evaluation 
C) Discourage new competitors 
D) For negotiations with unions 
A) Income tax deferral 
B) Performance evaluation 
C) Discourage new competitors 
D) For negotiations with unions

Question 13

John Smith is the controller of Excel Co. ,a private company owned by Rita Cooler.John receives a bonus equal to 10 percent of net income,before the bonus,as calculated in accordance with GAAP.
Required:
Explain how John Smith is both the preparer and a user of the financial statements of Excel Co.and whether or not he will likely try to defer income taxes.

Accepted Answer

As the controller,John will likely have

Question 14

How does a company usually take a "big bath" in a loss year?

Accepted Answer

A) Reduces its long-term liabilities 
B) Expenses as many of its costs as possible 
C) Recognizes revenue as soon as possible 
D) Writes-down its assets 
A) Reduces its long-term liabilities 
B) Expenses as many of its costs as possible 
C) Recognizes revenue as soon as possible 
D) Writes-down its assets

Question 15

Which of the following Canadian accounting standards are not included in the CICA Handbook?

Accepted Answer

A) Publicly accountable enterprises 
B) Private enterprises 
C) Not-for-profit organizations 
D) Government 
A) Publicly accountable enterprises 
B) Private enterprises 
C) Not-for-profit organizations 
D) Government

Question 16

Which of the following statements about the use of GAAP for private companies is true?

Accepted Answer

A) Private companies must use IFRS. 
B) Private companies must use Accounting Standards for Private Enterprises. 
C) Private companies may use either full IFRS or Accounting Standards for Private Enterprises. 
D) Private companies may use either modified IFRS or Accounting Standards for Private Enterprises. 
A) Private companies must use IFRS. 
B) Private companies must use Accounting Standards for Private Enterprises. 
C) Private companies may use either full IFRS or Accounting Standards for Private Enterprises. 
D) Private companies may use either modified IFRS or Accounting Standards for Private Enterprises.

Question 17

Companies that find themselves with poor earnings in a certain year will often decide to take a "big bath".
Required:
Explain what a "big bath" is and the motivation behind it.Why does this type of earnings management "tread very close to the line of ethical reporting"?

Accepted Answer

When a company has a loss year,there is

Question 18

How do financial analysts refer to earnings that correspond closely to cash flows?

Accepted Answer

A) Cash flow per share 
B) High quality earnings 
C) Earnings determined on a cash basis 
D) Low quality earnings 
A) Cash flow per share 
B) High quality earnings 
C) Earnings determined on a cash basis 
D) Low quality earnings

Question 19

In preparing financial statements with cash flow prediction as a major objective,a company should choose an accounting policy that ________.

Accepted Answer

A) allows a cost to be capitalized 
B) allows a cost to be expensed 
C) results in income-smoothing 
D) maximizes net income 
A) allows a cost to be capitalized 
B) allows a cost to be expensed 
C) results in income-smoothing 
D) maximizes net income

Question 20

In the U.S. ,accounting standards are set by the Financial Accounting Standards Board (FASB).From which body does FASB derive its authority?

Accepted Answer

A) US government 
B) American Institute of Certified Public Accountants (AICP
A)  
C) Securities and Exchange Commission (SE
C)  
D) International Accounting Standards Board (IAS
B)  
A) US government 
B) American Institute of Certified Public Accountants (AICP
A)  
C) Securities and Exchange Commission (SE
C)  
D) International Accounting Standards Board (IAS
B)

Which of the following statements about IFRS is true?

Which of the following user groups has the most influence on reporting objectives?

For international standards to be applied effectively,a country does not require ________.

Which financial reporting objective is common to both users and preparers of financial statements?

Sheng Ltd. ,a private company,is seeking financing.Why might it be advantageous for Sheng to use IFRS rather than Accounting Standards for Private Enterprises (ASPE)?

Which financial reporting approach has Canada decided to take with respect to private enterprises?

What does accounting harmonization refer to?

A company has chosen accounting policies that result in maximizing its net income.Which of the following is not a reason for doing this?

A company has chosen accounting policies that result in minimizing its net income.Which of the following is not a reason for doing this?

How does a company usually take a "big bath" in a loss year?

Which of the following Canadian accounting standards are not included in the CICA Handbook?

Which of the following statements about the use of GAAP for private companies is true?

Companies that find themselves with poor earnings in a certain year will often decide to take a "big bath". Required: Explain what a "big bath" is and the motivation behind it.Why does this type of earnings management "tread very close to the line of ethical reporting"?

How do financial analysts refer to earnings that correspond closely to cash flows?

In preparing financial statements with cash flow prediction as a major objective,a company should choose an accounting policy that ________.

In the U.S. ,accounting standards are set by the Financial Accounting Standards Board (FASB).From which body does FASB derive its authority?

Intercorporate Equity Investments: an Introduction

Business Combinations

Wholly-Owned Subsidiaries: Reporting Subsequent to Acquisition

Consolidation of Non-Wholly Owned Subsidiaries

Subsequent-Year Consolidations: General Approach

Segmented and Interim Reporting

Foreign Currency Transactions and Hedges

Reporting Foreign Operations

Financial Reporting for Not-For-Profit Organizations

Public Sector Financial Reporting

Income Tax Allocation

Income Tax Allocation Subsequent to Acquisition

Good will Impairment Test

Step Purchases

Decreases in Ownership Interest

Preferred and Restricted Shares of Investee Corporation

Intercompany Bond Holdings

Fund Accounting

Filters

Exam 1: Setting the Stage

Which of the following statements about IFRS is true?

Which of the following user groups has the most influence on reporting objectives?

For international standards to be applied effectively,a country does not require ________.

Which financial reporting objective is common to both users and preparers of financial statements?

Sheng Ltd. ,a private company,is seeking financing.Why might it be advantageous for Sheng to use IFRS rather than Accounting Standards for Private Enterprises (ASPE)?

Which financial reporting approach has Canada decided to take with respect to private enterprises?

What does accounting harmonization refer to?

A company has chosen accounting policies that result in maximizing its net income.Which of the following is not a reason for doing this?

A company has chosen accounting policies that result in minimizing its net income.Which of the following is not a reason for doing this?

How does a company usually take a "big bath" in a loss year?

Which of the following Canadian accounting standards are not included in the CICA Handbook?

Which of the following statements about the use of GAAP for private companies is true?

Companies that find themselves with poor earnings in a certain year will often decide to take a "big bath". Required: Explain what a "big bath" is and the motivation behind it.Why does this type of earnings management "tread very close to the line of ethical reporting"?

How do financial analysts refer to earnings that correspond closely to cash flows?

In preparing financial statements with cash flow prediction as a major objective,a company should choose an accounting policy that ________.

In the U.S. ,accounting standards are set by the Financial Accounting Standards Board (FASB).From which body does FASB derive its authority?

Intercorporate Equity Investments: an Introduction

Business Combinations

Wholly-Owned Subsidiaries: Reporting Subsequent to Acquisition

Consolidation of Non-Wholly Owned Subsidiaries

Subsequent-Year Consolidations: General Approach

Segmented and Interim Reporting

Foreign Currency Transactions and Hedges

Reporting Foreign Operations

Financial Reporting for Not-For-Profit Organizations

Public Sector Financial Reporting

Income Tax Allocation

Income Tax Allocation Subsequent to Acquisition

Good will Impairment Test

Step Purchases

Decreases in Ownership Interest

Preferred and Restricted Shares of Investee Corporation

Intercompany Bond Holdings

Fund Accounting

Filters