Deck 6: Normative Theories of Accountingthe Case of Conceptual Framework Projects

Question 1

Which of the following is a characteristic of reliability?

A) It influences economic decisions
B) It represents faithfully what it purports to represent
C) It provides predictive value and feedback to confirm or correct earlier expectations
D) None of the given options are correct

Answer 1

B

Question 2

Which of the following cannot be concluded from an overview of the history of the development of conceptual framework projects?

A) A number of countries have successfully completed conceptual framework projects
B) Those responsible for them have either been reluctant to promote significant changes, or the changes suggested have not been accepted
C) Conceptual framework projects have been reluctant to prescribe a particular valuation or measurement approach
D) The conceptual framework is a continuous and evolving project

Answer 2

A

Question 3

Which of the following is a qualitative characteristic of financial information in general purpose financial reports,if they are to be useful?

A) Understandability
B) Comparability
C) Reliability
D) All of the given options are correct

Answer 3

D

Question 4

The objective of general purpose financial reporting is stated in most conceptual frameworks as providing decision-useful information to users of financial reports.Which of the following are not regarded as legitimate users of financial reports according to the IASB Framework?

A) Users without some proficiency in financial accounting
B) Recipients of goods and services
C) Special interest groups in the general public
D) All of the given options are correct

Question 5

Which of the following appears to be most influential in developing the objectives of financial reporting and a number of other concepts that have been used as a basis for most conceptual framework projects?

A) Accounting Principles Board (APB) Statement No 4 (1970)
B) The Trueblood Report (1973)
C) The UK Corporate Report (1976)
D) The Stamp Report (1980)

Question 6

Which of the following will satisfy the definition of a constructive liability,as outlined in the IASB Framework?

A) A decision by management to carry out maintenance over the next two years
B) A public offer to repair a defective good, even if it is out of warranty
C) A parent company's guarantee to meet the debts of a subsidiary entity if the subsidiary itself cannot pay them
D) All of the given options are correct

Question 7

Which of the following is true in relation to expenses,according to the IASB Framework?

A) Expenses are restricted to transactions and events relating to 'ongoing major or central operations'
B) There is no reference to matching of revenue and expenses in the Framework
C) Expenses would not include losses that were not under the control of the entity, such as uninsured losses of assets from flood
D) None of the given options are correct

Question 8

On what is a 'reporting entity',as defined in SAC 1,dependent?

A) Whether there are users that are dependent on the reports to make or evaluate resource decisions
B) Professional judgment providing some guidelines to help make a decision
C) Whether there are users that are dependent on the reports to make or evaluate resource decisions, and professional judgement provides some guidelines to help make a decision
D) The Corporations Law based on measures of gross revenue, dollar value of assets and the number of employees

Question 9

According to the IASB definition of 'income',which of the following is not included?

A) Non-reciprocal transfers such as grants, bequests or liabilities forgiven
B) Gains and losses from the sale of assets
C) Enhancement of assets
D) Dividends received

Question 10

Which of the following represents a contradiction,rather than a trade-off that needs to be balanced?

A) Information may be reliable, but the time taken to ensure its reliability may result in it being potentially irrelevant
B) Determining whether the benefits derived from information are greater than the costs to produce it
C) The argument for neutrality and faithful representation; but standard-setters consider the economic consequences of standards
D) Information may be relevant, but the data may be so unreliable that it could be potentially misleading

Question 11

What is the objective of financial reporting,as stated in the IASB Framework for the Preparation and Presentation of Financial Reports,and consistent with the Australian SAC 2: Objectives of Financial Reporting?

A) Stewardship
B) Accountability
C) Decision usefulness
D) All of the given options are correct

Question 12

Which of the following was particularly concerned with addressing the rights of the community,in terms of access to financial information about entities?

A) Accounting Principles Board (APB) Statement No 4
B) The Trueblood Report
C) The UK Corporate Report
D) The FASB Conceptual Framework Project

Question 13

Which of the following is not a characteristic of a liability,according to the IASB Framework?

A) A future deposition or transfer of economic benefits to others
B) A past transaction or event to have created the obligation
C) There must be a legal obligation
D) None of the given options are correct

Question 14

The components,or building blocks,in the IASB Framework for the Preparation and Presentation of Financial Statements do not include:

A) The definition of 'financial reporting'
B) Definition of users and their needs
C) Underlying assumptions
D) Accounting standards

Question 15

Which characteristic of information,when omitted or mis-stated,could influence economic decisions taken by users on the basis of financial statements?

A) Relevance
B) Reliability
C) Materiality
D) Comparability

Question 16

Which of the following is not a characteristic of an asset,according to the IASB Framework?

A) Expected future economic benefit
B) The entity must have ownership over the resource giving rise to the future economic benefits
C) The transaction or event giving rise to the ownership over future economic benefits must have occurred
D) The reporting entity must have control over the resource to benefit from it, or to deny or regulate the access of others to the benefit

Question 17

Since 1 January 2005,the Australian Accounting Standards Board's conceptual framework consists of:

A) The IASB's Framework for the Preparation and Presentation of Financial Statements
B) SAC 1: Definition of a Reporting Entity
C) SAC 2: Objectives of General Purpose Financial Reporting
D) All of the given options are correct

Question 18

Which of the following describes the accounting process?

A) Technical
B) Political
C) Procedural
D) Objective

Question 19

What is the definition of the 'conceptual framework'?

A) A set of prescriptions of what accounting should be
B) A structured positive theory of accounting
C) A coherent system of objectives and fundamentals that are expected to lead to consistent standards
D) A group of independent concepts on specific accounting issues, that are grouped together to provide a single reference

Question 20

What is the purpose of developing a conceptual framework?

A) To provide a coherent structure to accounting practice, which had developed in an ad hoc way
B) To guide standard-setters to develop standards based on the same concepts and principles, rather than in a piece-meal approach
C) To guide users where there is no accounting standard covering an issue
D) All of the given options are correct

Question 21

Which of the following is not a perceived advantage in developing a conceptual framework project?

A) Standard-setters will be less accountable for their decisions
B) Setting accounting standards will be more economical, despite resources needed to develop the Conceptual Framework and standards
C) It will result in a reduced number of accounting standards where issues are covered by the Framework
D) It will provide a defence and enhance the legitimacy of the accounting profession

Question 22

In Australia,according to SAC 2 'Objective of General-Purpose Financial Reporting',the primary user groups(s)of general purpose financial reports are:

A) Resource providers
B) Recipients of goods and services
C) Parties performing a review or oversight function
D) All of the given options are correct

Question 23

Which of the following measurement methods is not explicitly recognised in the IASB Framework,although it is recognised in the FASB Framework?

A) Current market value
B) Current replacement cost
C) Net realisable value
D) Present value

Question 24

Which of the following is a characteristic of relevance?

A) It influences economic decisions
B) It represents faithfully what it purports to represent
C) It provides predictive value and feedback to confirm or correct earlier expectations
D) None of the given options is correct

Question 25

What does the political legitimacy argument,as outlined by Hines (1991),suggest?

A) The accounting profession consists of experts in technical knowledge of accounting, and therefore should be given authority to regulate accounting
B) The accounting profession used the development of the conceptual framework as a strategy to promote their self-regulation interests
C) The Conceptual Framework provides the authority to resolve technical issues with authority and legitimacy
D) As users are politically involved in developing the Conceptual Framework, the outcome has political legitimacy

Question 26

Over time,a number of objectives have been attributed to information provided within financial statements.Which of the following is not an objective of financial statements?

A) To enable outsiders to assess the stewardship of management
B) To provide information to users that is useful for making and evaluating decisions about the allocation of scarce resources
C) To enable reporting entities to demonstrate accountability between the entity and those parties to which the entity is deemed to be accountable
D) To help managers to maximise their own wealth and the wealth of the organisation

Question 27

According to the IASB Exposure Draft,a Conceptual Framework:

A) Is a coherent system of concepts that flow from an objective
B) Provides guidance on identifying the boundaries of financial reporting in selecting the transactions, other events and circumstances to be represented
C) Outlines how transactions should be recognised and measured (or disclosed)
D) All of the given options are correct

Question 28

Which of the following statements is incorrect regarding the current work of IASB and FASB on the Conceptual framework project?

A) IASB and FASB appear to maintain a restricted view of the users of general purpose financial reports, and tend to disregard information rights or needs of users who do not have a direct financial interest in the organisation
B) On the level of expertise expected of financial report readers, both parties accept that readers are expected to have some proficiency in financial accounting
C) The conceptual framework project is a major undertaking for both Boards, and will take several years to complete
D) Both Boards have agreed that the primary user group of general purpose financial reports is present and potential equity investors