Question 1

In accounting,'value' can mean:

Accepted Answer

A)  historical cost 
B)  market value 
C)  replacement cost 
D)  any of the above 
A)  historical cost 
B)  market value 
C)  replacement cost 
D)  any of the above D

Question 2

In the Framework,'probable' means:

Accepted Answer

A)  greater than 50% certainty 
B)  50% certainty 
C)  greater than 75% certainty 
D)  greater than 95% certainty 
A)  greater than 50% certainty 
B)  50% certainty 
C)  greater than 75% certainty 
D)  greater than 95% certainty A

Question 3

Discuss the advantages and disadvantages associated with the use of the contract-price method of measuring liabilities.

Accepted Answer

The contract-price method of measuring liabilities has both advantages and disadvantages.

Advantages:
1. Simplicity: The contract-price method is relatively simple to use, as it involves measuring liabilities at the amount specified in the contract. This can make it easier for companies to calculate and report their liabilities accurately.

2. Certainty: Using the contract-price method provides a high level of certainty regarding the amount of liabilities. Since the liabilities are measured at the contract price, there is no need for estimation or uncertainty about future cash flows.

3. Compliance: In some cases, using the contract-price method may be required by accounting standards or regulations. This can make it easier for companies to comply with reporting requirements.

Disadvantages:
1. Lack of relevance: The contract-price method may not always reflect the true economic value of the liabilities. In some cases, the contract price may not accurately represent the fair value of the liabilities, leading to potential distortions in financial reporting.

2. Inflexibility: Using the contract-price method can be inflexible, especially in situations where the contract price does not reflect the current market conditions or changes in the business environment. This can lead to outdated and inaccurate measurements of liabilities.

3. Limited applicability: The contract-price method may not be suitable for all types of liabilities, especially those that are complex or involve uncertain future cash flows. In such cases, alternative methods of measuring liabilities may be more appropriate.

In conclusion, while the contract-price method of measuring liabilities has its advantages in terms of simplicity, certainty, and compliance, it also has significant drawbacks in terms of relevance, inflexibility, and limited applicability. Companies should carefully consider these factors when deciding whether to use the contract-price method for measuring their liabilities.

Question 4

Under the Framework,the statement that is correct is:

Accepted Answer

A)  Equity is defined independently of assets and liabilities 
B)  The recognition criteria of probability and measurability apply to equity 
C)  The measurement of equity depends on the basis of measurement employed for assets and liabilities 
D)  All of the statements are correct 
A)  Equity is defined independently of assets and liabilities 
B)  The recognition criteria of probability and measurability apply to equity 
C)  The measurement of equity depends on the basis of measurement employed for assets and liabilities 
D)  All of the statements are correct

Question 5

It is a conventional accounting practice to recognise a doubtful debts expense when the probability of a decrease in economic benefits is:

Accepted Answer

A)  more than 90% likely 
B)  less than 50% likely 
C)  more than 60% likely 
D)  beyond a reasonable doubt 
A)  more than 90% likely 
B)  less than 50% likely 
C)  more than 60% likely 
D)  beyond a reasonable doubt

Question 6

The receipt of cash or its equivalent from an income transaction is known as:

Accepted Answer

A)  realisation 
B)  resolution 
C)  reception 
D)  recognition 
A)  realisation 
B)  resolution 
C)  reception 
D)  recognition

Question 7

Future economic benefits for assets come from:

Accepted Answer

A)  value-in-utility 
B)  value-in-exchange 
C)  value-in-use 
D)  both B and C 
A)  value-in-utility 
B)  value-in-exchange 
C)  value-in-use 
D)  both B and C

Question 8

Which of these is the strongest argument in favour of current replacement cost as an alternative to historical cost?

Accepted Answer

A)  Current replacement cost provides a more reliable measure of performance 
B)  Current replacement cost provides a more relevant measure of performance 
C)  Current replacement cost provides a more reliable balance sheet 
D)  Current replacement cost provides better information on cash flows 
A)  Current replacement cost provides a more reliable measure of performance 
B)  Current replacement cost provides a more relevant measure of performance 
C)  Current replacement cost provides a more reliable balance sheet 
D)  Current replacement cost provides better information on cash flows

Question 9

Assume that assets have been offered for sale and that PV = present value,MV = net market value and RC = current replacement cost.If RC > MV > PV,the deprival value of the asset is:

Accepted Answer

A)  net market value 
B)  present value 
C)  current replacement cost 
D)  cannot be determined 
A)  net market value 
B)  present value 
C)  current replacement cost 
D)  cannot be determined

Question 10

The correct statement is:

Accepted Answer

A)  Value-in-use is lower than value-in-exchange for most assets 
B)  The value of an asset is the lower of its value-in-use and its value-in-exchange 
C)  If value-in-use is higher than value-in-exchange the asset should be offered for sale 
D)  The value of an asset is the higher of its value-in-use and its value-in-exchange 
A)  Value-in-use is lower than value-in-exchange for most assets 
B)  The value of an asset is the lower of its value-in-use and its value-in-exchange 
C)  If value-in-use is higher than value-in-exchange the asset should be offered for sale 
D)  The value of an asset is the higher of its value-in-use and its value-in-exchange

Question 11

Which statement concerning liabilities is not correct?

Accepted Answer

A)  If a material liability fails the probability test, it may still warrant disclosure in the notes to the financial statements 
B)  If a material liability cannot be measured reliably, then it should not be recognised in the accounts 
C)  If the probability that a previously recognised liability will have to be settled falls below 50%, it should still remain in the balance sheet 
D)  None of the statements is incorrect, i.e., all are correct statements 
A)  If a material liability fails the probability test, it may still warrant disclosure in the notes to the financial statements 
B)  If a material liability cannot be measured reliably, then it should not be recognised in the accounts 
C)  If the probability that a previously recognised liability will have to be settled falls below 50%, it should still remain in the balance sheet 
D)  None of the statements is incorrect, i.e., all are correct statements

Question 12

Explain and discuss the assertion that current replacement cost provides a more relevant but less reliable measure of assets than historical cost.

Accepted Answer

The assertion that current replacement c

Question 13

The correct statement is:

Accepted Answer

A)  If the 0.5 probability recognition criteria from the Framework were applied to revenue, it is likely that revenue would generally be recognised earlier in the operating cycle than at present 
B)  If the 0.5 probability recognition criteria from the Framework were applied to expenses, it is likely that expenses would generally be recognised earlier in the operating cycle than at present 
C)  If the 0.5 probability recognition criteria from the Framework were applied to revenue, it is likely that revenue would generally be recognised later in the operating cycle than at present 
D)  None of the statements is correct 
A)  If the 0.5 probability recognition criteria from the Framework were applied to revenue, it is likely that revenue would generally be recognised earlier in the operating cycle than at present 
B)  If the 0.5 probability recognition criteria from the Framework were applied to expenses, it is likely that expenses would generally be recognised earlier in the operating cycle than at present 
C)  If the 0.5 probability recognition criteria from the Framework were applied to revenue, it is likely that revenue would generally be recognised later in the operating cycle than at present 
D)  None of the statements is correct

Question 14

Under the Framework,assets should be recognised in the balance sheet when:

Accepted Answer

A)  future economic benefits can probably be measured reliably 
B)  future economic benefits are relevant, reliable and material 
C)  future economic benefits are probable and cost or value can be measured reliably 
D)  future economic benefits are relevant and can be measured reliably 
A)  future economic benefits can probably be measured reliably 
B)  future economic benefits are relevant, reliable and material 
C)  future economic benefits are probable and cost or value can be measured reliably 
D)  future economic benefits are relevant and can be measured reliably

Question 15

The amount that an entity would need to receive to compensate it for the loss of an asset is known as:

Accepted Answer

A)  value-in-use 
B)  carrying value 
C)  deprival value 
D)  value-in-exchange 
A)  value-in-use 
B)  carrying value 
C)  deprival value 
D)  value-in-exchange

Question 16

Which of the following provides an example of measurement based on a nominal scale?

Accepted Answer

A)  Postcode 
B)  Temperature using centigrade 
C)  Temperature using Fahrenheit 
D)  The outcome of an election process 
A)  Postcode 
B)  Temperature using centigrade 
C)  Temperature using Fahrenheit 
D)  The outcome of an election process

Question 17

Which of these is not a difference between the contract-price method and the internal-yield method of valuing liabilities?

Accepted Answer

A)  Ease/difficulty of calculation 
B)  Treatment of the time value of money 
C)  Reliance on historical cost information 
D)  Treatment of the interest obligation 
A)  Ease/difficulty of calculation 
B)  Treatment of the time value of money 
C)  Reliance on historical cost information 
D)  Treatment of the interest obligation

Question 18

For which of the following groups would all of the items be regarded as expenses under the Framework?

Accepted Answer

A)  Dividends paid, cost of goods sold, electricity 
B)  Depreciation, payment of a creditor for expenses, salaries 
C)  Interest, rent, stock loss, amortisation 
D)  Inventory, light and power, cleaning 
A)  Dividends paid, cost of goods sold, electricity 
B)  Depreciation, payment of a creditor for expenses, salaries 
C)  Interest, rent, stock loss, amortisation 
D)  Inventory, light and power, cleaning

Question 19

There is wide agreement that the soundest measure,conceptually,of value-in-use is:

Accepted Answer

A)  historical cost less accumulated depreciation 
B)  the estimated net market value if the asset was sold in the ordinary course of business 
C)  deprival value 
D)  the discounted value of the asset's future cash flows 
A)  historical cost less accumulated depreciation 
B)  the estimated net market value if the asset was sold in the ordinary course of business 
C)  deprival value 
D)  the discounted value of the asset's future cash flows

Question 20

If accountants cannot agree on a single basis of measurement,then the best approach is to present the financial statements under several alternatives and let the user choose the one that is best suited to their needs.Discuss.

Accepted Answer

Presenting financial statements under se

Exam 4: A Conceptual Framework: Recognition and Measurement of the Elements of Financial Statements

In accounting,'value' can mean:

In the Framework,'probable' means:

Discuss the advantages and disadvantages associated with the use of the contract-price method of measuring liabilities.

Under the Framework,the statement that is correct is:

It is a conventional accounting practice to recognise a doubtful debts expense when the probability of a decrease in economic benefits is:

The receipt of cash or its equivalent from an income transaction is known as:

Future economic benefits for assets come from:

Which of these is the strongest argument in favour of current replacement cost as an alternative to historical cost?

Assume that assets have been offered for sale and that PV = present value,MV = net market value and RC = current replacement cost.If RC > MV > PV,the deprival value of the asset is:

The correct statement is:

Which statement concerning liabilities is not correct?

Explain and discuss the assertion that current replacement cost provides a more relevant but less reliable measure of assets than historical cost.

The correct statement is:

Under the Framework,assets should be recognised in the balance sheet when:

The amount that an entity would need to receive to compensate it for the loss of an asset is known as:

Which of the following provides an example of measurement based on a nominal scale?

Which of these is not a difference between the contract-price method and the internal-yield method of valuing liabilities?

For which of the following groups would all of the items be regarded as expenses under the Framework?

There is wide agreement that the soundest measure,conceptually,of value-in-use is:

If accountants cannot agree on a single basis of measurement,then the best approach is to present the financial statements under several alternatives and let the user choose the one that is best suited to their needs.Discuss.

Institutional Arrangements for Setting Accounting Standards in Australia

A Conceptual Framework: Scope, reporting Entity and the Objective of Financial Report

A Conceptual Framework: the Fundamentals of General Purpose Financial Reporting

The Choice of Accounting Methods

The Balance Sheet: an Overview

Accounting for Current Assets

Accounting for Property, plant and Equipment

Accounting for Company Income Tax

Accounting for Investments

Accounting for Intangible Assets

Accounting for Leases

Accounting for Employee Benefits

Accounting for Financial Instruments

Equity

The Income Statement

The Cash Flow Statement

Financial Reporting: Segment Reporting, value Added Statements, highlights Statements and Future-Oriented Financial Information

Further Financial Reporting Issues

Accounting for the Extractive Industries

Accounting for Real Estate Development and Construction Contracts

Accounting for Agricultural Activity

Accounting for Superannuation Plans

Accounting for Financial Institutions

Financial Reporting in the Public Sector

International Accounting Standards, harmonisation and Convergence

Foreign Currency Translation

Accounting for Corporate Social Responsibilities

Ethics in Accounting

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