Deck 24: Presentation and Disclosure in Financialreporting

Question 1

If 10 percent or more of company revenue is derived from a single customer, the company must disclose the total amount of revenue from each such customer by segment.

Answer 1

True

Question 2

IASB rules directly affect financial statements, notes to the financial statements, and management commentary.

Answer 2

False

Question 3

IFRS for SMEs is more complex than regular IFRS.

Answer 3

False

Question 4

Companies should report accounting transactions as they occur, and expense recognition should not change with the period of time covered under the integral approach.

Question 5

If the loss on an account receivable results from a customer's bankruptcy after the statement of financial statement date, the company only discloses this information in the notes to the financial statements.

Question 6

The IASB requires allocations of joint, common, or company-wide costs solely for external reporting purposes.

Question 7

The IASB has issued many pronouncements in the last 10 years that have substantial disclosure provisions.

Question 8

While there are no formal IFRS requirement for management commentary, the IASB has initiated a project that offers a non-binding framework and limited guidance on its application, which could be adapted to the legal and economic circumstances of individual jurisdictions.

Question 9

The IASB has developed IFRS for small-and medium-sized entities that publish general-purpose financial statement for external users but do not issue shares in a public market.

Question 10

The IASB and FASB require companies to provide expanded disclosure about their contractual obligations.

Question 11

IFRS requires that general-purpose financial statements include selected information on a single basis of segmentation.

Question 12

Companies should generally use the same accounting policies for interim reports and for annual reports.

Question 13

IASB rules directly affect financial statements, notes to the financial statements, and supplementary information.

Question 14

Other types of information found in the annual report, such as management commentary and the letter to shareholders, are subject to IASB rules.

Question 15

Income tax expense is recognized in each interim period based on the best estimate of the weighted-average annual income tax rate expected for the full financial year.

Question 16

The operating approach reflects how management segments the company for making operating decisions.

Question 17

In order to make adequate disclosure of related party transactions, companies should report the legal form, rather than the economic substance, of these transactions.

Question 18

A qualified opinion is issued when the exception to the standard opinion is not of sufficient magnitude to invalidate the statements as a whole.

Question 19

Accounting policies are the specific accounting principles and methods a company uses and considers most appropriate to present fairly its financial statements.

Question 20

Management commentary helps in the interpretation of the financial position, financial performance, and cash flows of a company.

Question 21

Which of the following subsequent events would generally require disclosure, but no adjustment of the financial statements?

A)Retirement of the company president
B)Settlement of litigation when the event that gave rise to the litigation occurred prior to the statement of financial position date.
C)Employee strikes
D)Issue of a large amount of ordinary shares.

Question 22

The full disclosure principle, as adopted by the accounting profession, is best described by which of the following?

A)All information related to an entity's business and operating objectives is required to be disclosed in the financial statements.
B)Information about each account balance appearing in the financial statements is to be included in the notes to the financial statements.
C)Enough information should be disclosed in the financial statements so a person wishing to invest in the shares of the company can make a profitable decision.
D)Disclosure of any financial facts significant enough to influence the judgment of an informed reader.

Question 23

All of the following are benefits to the IASB requiring a reconciliation between the effective tax rate and the government's statutory rate except

A)An investor can determine the actual taxes paid by the enterprise.
B)This reconciliation is important if the enterprise has substantial fluctuations in its effective tax rate caused by unusual or infrequent transactions.
C)This information is effective in identifying a favorable tax treatment that is not sustainable.
D)The reconciliation can identify past penalties levied by the IRS on the company.

Question 24

Which of the following are defined as intentional distortions of financial statements.

Question 25

Revenue of a segment includes

A)only sales to unaffiliated customers.
B)sales to unaffiliated customers and intersegment sales.
C)sales to unaffiliated customers and interest revenue.
D)sales to unaffiliated customers and other revenue and gains.

Question 26

All of the following are ways in which simplified IFRS is less complex than full IFRS except which statement?

A)Topics that are not relevant for SMEs are omitted.
B)Simplified IFRS for SMEs allows fewer accounting policy choices.
C)Revisions to the IFRS for SMEs will be limited to once every five years.
D)Significantly fewer disclosures are required.

Question 27

The IASB and the FASB are proposing better ways to present information for businesses in the statement of financial position, including the separation of assets and liabilities into operating and investing categories.

Question 28

The difference between a financial forecast and a financial projection is that a forecast provides information on what is expected to happen, while a projection provides information on what might take place but is not necessarily expected to happen.

Question 29

According to IAS 1, which of the following are not commonly required disclosures of accounting policies?

A)the measurement basis or bases used in the financial statements
B)personnel involved in drafting the summary of significant accounting policies or other notes, including those who made the judgments apart from those involving estimations
C)disclosures required by other IFRSs, like the reasons why the entity's ownership interest does not constitute control
D)the nature of a company's operations and the policies that the users of its financial statements would expect to be disclosed for that type of entity

Question 30

All of the following are reasons that the amount of disclosure provisions issued by the IASB has increased in the last 10 years except

A)There has been greater complexity of the business environment.
B)There has greater necessity for timely information.
C)Accounting has become more important as a control and monitoring device.
D)More disclosure means lower costs for companies.

Question 31

A financial projection is a set of prospective financial statements that present a company's expected financial position, results of operations, and cash flows.

Question 32

An example of an inventory accounting policy that should be disclosed in a Summary of Significant Accounting Policies is the

A)composition of inventory into raw materials, work-in-process, and finished goods.
B)major backlogs of inventory orders.
C)method used for pricing inventory.
D)All of these answer choices should be disclosed.

Question 33

If a business entity entered into certain related party transactions, it would be required to disclose all of the following information except the

A)nature of the relationship between the parties to the transactions.
B)nature of any future transactions planned between the parties and the terms involved.
C)dollar amount of the transactions for each of the periods for which an income state-ment is presented.
D)amounts due from or to related parties as of the date of each statement of financial position presented.

Question 34

The disclosure of accounting policies, is important to financial statement readers in determining

A)net income for the year.
B)whether accounting policies are consistently applied from year to year.
C)the value of obsolete items included in ending inventory.
D)whether the working capital position is adequate for future operations.

Question 35

Fraudulent financial reporting is intentional or reckless conduct, whether by act or omission, that results in materially misleading financial statements.

Question 36

Which of the following subsequent events would require adjustment of the accounts before issuance of the financial statements?

A)Loss of plant as a result of fire
B)Changes in the quoted market prices of securities held as an investment
C)Loss on an uncollectible account receivable resulting from a customer's major flood loss
D)Loss on a lawsuit, the outcome of which was deemed uncertain at year end.

Question 37

Events that occur after the December 31, 2015 statement of financial position date (but before the statement of financial position is authorized to be issued) and provide additional evidence about conditions that existed at the statement of financial position date and affect the realizability of accounts receivable should be

A)discussed only in the Management commentary section of the annual report.
B)disclosed only in the Notes to the Financial Statements.
C)used to record an adjustment to Accounts Receivable at December 31, 2015.
D)used to record an adjustment directly to the Retained Earnings account

Question 38

Which of the following should be disclosed in a Summary of Significant Accounting Policies?

A)Types of executory contracts
B)Amount for cumulative effect of change in accounting policy
C)Claims of equity holders
D)Depreciation method followed

Question 39

All of the following statementsare true regarding the IASB and disclosure of dividend policies except;

A)According to IASB, companies must meet a minimum payout ratio before they are required to disclose their dividend policies in their annual reports.
B)IASB encourages companies to report their dividend policies in their annual reports if they do not expect to pay dividends in the foreseeable future.
C)IASB encourages companies to report their dividend policies in their annual reports if they have earning but fail to pay dividends.
D)IASB encourages companies that show a consistent pattern of paying dividends to indicate whether they intend to continue this practice in the future.

Question 40

Influences in a company's internal environment may relate to industry conditions, poor internal control systems, or legal and regulatory considerations.

Question 41

For interim financial reporting, a company's income tax expense for the second quarter should be computed by using the:

A)statutory tax rate for the year.
B)effective tax rate expected to be applicable for the second quarter.
C)effective tax rate expected to be applicable for the full year as estimated at the end of the first quarter.
D)effective tax rate expected to be applicable for the full year as estimated at the end of the second quarter.

Question 42

A segment of a business enterprise is to be reported separately when the revenues of the segment exceed 10 percent of the

A)total combined revenues of all segments reporting profits.
B)total revenues of all the enterprise's industry segments.
C)total export and foreign sales.
D)combined net income of all segments reporting profits.

Question 43

Accounting policies are modified for the following at interim dates.

Question 44

In considering interim financial reporting, how does IFRS conclude that such reporting should be viewed?

A)As a "special" type of reporting that need not follow international financial reporting standards
B)As useful only if activity is evenly spread throughout the year so that estimates are unnecessary.
C)As reporting for an integral part of an annual period.
D)As reporting for a separate accounting period

Question 45

What did the IASB decide was a reasonable upper limit for the number of segments that a company must disclose?

A)two
B)five
C)six
D)ten

Question 46

Theoretically, in computing the accounts receivable turnover, the numerator should include

A)net sales.
B)net credit sales.
C)sales.
D)credit sales.

Question 47

IFRS requires that

A)all companies that issue an annual report should issue interim financial reports.
B)the integral view is the most appropriate approach to take in preparing interim financial reports.
C)the three basic financial statements should be presented each time an interim period is reported upon.
D)the same accounting principles used for the annual report should be employed for interim reports.

Question 48

All of the following information about each operating segment must be reported except

A)unusual items.
B)interest revenue.
C)cost of goods sold.
D)depreciation and amortization expense.

Question 49

An operating segment is a reportable segment if

A)its operating profit is 10% or more of the combined operating profit of profitable segments.
B)its operating loss is 10% or more of the combined operating losses of segments that incurred an operating loss.
C)the absolute amount of its operating profit or loss is 10% or more of the company's combined operating profit or loss.
D)none of these answer choices are correct.

Question 50

A financial forecast presents to the best of the responsible party's knowledge and belief,

A)of an entity's expected financial position, results of operations, and cash flows.
B)an assessment of the company's ability to be successful in the future.
C)given one or more hypothetical assumptions, of an entity's expected financial position, results of operations, and cash flows.
D)an assessment of the company's ability to be successful in the future under a number of different assumptions.

Question 51

Cash, short-term investments, and net receivables are the numerator for

Question 52

In presenting segment information,for which of the following items must a reconcilation be provided?

Question 53

If there is a lack of conformity with IFRS, but except for the effects of that nonconformity, the financial statements are fairly presented, what type of opinion is required?

A)Unqualified opinion.
B)Qualified opinion.
C)Adverse opinion.
D)A disclaimer of an opinion.

Question 54

Which of the following best characterizes the difference between a financial forecast and a financial projection?

A)Forecasts include a complete set of financial statements, while projections include only summary financial data.
B)A forecast is normally for a full year or more and a projection presents data for less than a year.
C)A forecast attempts to provide information on what is expected to happen, whereas a projection may provide information on what is not necessarily expected to happen.
D)A forecast includes data which can be verified about future expectations, while the data in a projection is not susceptible to verification.

Question 55

Companies should disclose all of the following in interim reports except

A)dividends paid.
B)changes in accounting policies.
C)balance in accounts receivable.
D)seasonal revenue, cost, or expenses.

Question 56

All of the following statements are true regarding IFRS and interim except

A)IFRS requires a complete set of financial statements at the interim reporting date.
B)IFRS companies expense interim amounts like advertising expenditures that could benefit later interim periods
C)IFRS leans toward the discrete approach.
D)No accruals or deferrals in anticipation of future events during the year should be reported.

Question 57

All of the following are technical accounting areas where FASB and IASB have not reached convergence on a set of accounting standards except

A)error correction.
B)prohibition of LIFO
C)reversal of impairments
D)earnings per share calculations

Question 58

If the financial statements examined by an auditor lead the auditor to issue an opinion that contains an exception that is not of sufficient magnitude to invalidate the statement as a whole, the opinion is said to be

A)unmodified.
B)qualified.
C)adverse.
D)exceptional.

Question 59

IFRS requires that a company report all to the following except

A)segment profits and loss and related information.
B)segment assets and liabilities.
C)major customers.
D)liquidity ratios.

Question 60

The accounting profession requires disaggregated information in the following ways:

A)products or services.
B)geographic areas.
C)major customers.
D)All of these answer choices are correct.

Question 61

Which of the following ratios measures long-term solvency?

A)Acid-test ratio
B)Accounts receivables turnover
C)Debt to assets
D)Current ratio

Question 62

The calculation of times interest earned involves dividing

A)net income by annual interest expense.
B)net income plus income taxes by annual interest expense.
C)net income plus income taxes and interest expense by annual interest expense.
D)none of these answer choices are correct.

Question 63

Elective exemptions to retrospective application in first-time adoption of IFRS include all of the following except

A)share-based payment transactions.
B)deferred taxes.
C)leases.
D)employee benefits.

Question 64

The payout ratio is calculated by dividing

A)dividends per share by earnings per share.
B)cash dividends by net income plus preference dividends.
C)cash dividends by market price per share.
D)cash dividends by net income.

Question 65

All of the following are exemptions to retrospective application in first-time adoption of IFRS except

A)estimates.
B)hedge accounting.
C)non-controlling interest.
D)deferred taxes.

Question 66

The return on ordinary share capital-equity is calculated by dividing

A)net income by average ordinary shareholders' equity.
B)net income less preference dividends by average ordinary shareholders' equity.
C)net income by ending ordinary shareholders' equity.
D)net income less preference dividends by ending ordinary shareholders' equity.

Question 67

The basic limitations associated with ratio analysis include

A)the lack of comparability among firms in a given industry.
B)the use of estimated items in accounting.
C)the use of historical costs in accounting.
D)all of these answer choices are correct.

Question 68

A company's first IFRS financial statements must include at least how many statements of financial position?

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

Question 69

How many years of comparative information must a company present under IFRS first-time adoption?

A)One.
B)Two.
C)Five.
D)Ten.

Question 70

When should an average amount be used for the numerator or denominator?

A)When the ratio consists of only statement of financial position items
B)When the ratio consists of only income statement items
C)When a ratio consists of an income statement item and a statement of financial position item
D)Never; the numerator or denominator should always be a year-end balance