Deck 7: Assets

Question 1

Barth and Kasznik reported that,between 1983 and 1995,in the United Kingdom,20% of firms recorded an asset revaluation reserve.

Answer 1

False

Question 2

The statement in relation to conservatism (prudence)that is true is:

A)Conservatism is inconsistent with the principle of neutrality
B)Conservatism means recording assets early
C)Conservatism means not depleting future resources
D)All of the statements are true.

Answer 2

A

Question 3

Under the IASB standards all wholly executory contracts are recognised as assets.

Answer 3

False

Question 4

The statement concerning the measurement of tangible assets that is not true is:

A)The traditional approach has been to measure tangible assets at historical cost
B)IAS 16 requires the use of the revaluation model for subsequent measurement of tangible assets
C)IAS 16 permits the use of a current value measurement model for tangible assets
D)None of the statements are untrue,i.e.all are true statements

Question 5

The IASB (AASB)Framework does refer to the conservatism (prudence)principle.

Question 6

The criteria that normally need to be recognised for a non-cancellable lease to be capitalised by a lessee IAS 17/AASB 117)is:

A)The lease term is for the major part of the economic life of the asset
B)At the inception of the lease,the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset
C)Both A and B
D)Either A or B

Question 7

The FASB and the IASB intend to address the issue of measurement of assets in Phase C of the conceptual framework project.

Question 8

IAS 39 created a separate category of assets and liabilities,financial assets and liabilities,and introduced associated measurement rules.

Question 9

Arguments in favour of including 'exchangeability' as an essential criterion for the identification of an asset under the IASB (AASB)Framework include which of the following?

A)That assets should be separable from the entity and have a separate disposal value
B)That exchange is only one way to obtain the benefit of an asset
C)That economic value depends upon scarcity and utility,but not on exchangeability
D)None of the above are arguments in favour of including exchangeability as an essential characteristic of an asset.

Question 10

The extent and timing of recognition of assets are important because:

A)They can affect the decision making for users of financial statements
B)They can affect the calculation of ratios which are important inputs for debt covenants
C)They can affect management compensation
D)All of the above

Question 11

Which of these is not an argument in favour of restricting the recognition of internally generated goodwill?

A)Good will is not separable from other assets
B)There are difficulties in identifying whether and when goodwill will generate future economic benefits
C)Goodwill cannot be sold
D)All of the above

Question 12

IAS 16 and IAS 40 permit,but do not require,the use of a current value measurement model.

Question 13

To fulfil the IASB (AASB)Framework criteria that an asset must have 'future economic benefits' which of the following criteria must be met?
I)It must be scarce
Ii)It must have utility
Iii)It must be capable of generating cash inflows to the entity

A)i,ii,
B)i,iii
C)i,ii,ii
D)iii

Question 14

Exchangeability is a characteristic that supports the existence of an asset,however,it is not an essential characteristic.

Question 15

The recognition rules for assets contained in the Framework are extensions of the subsidiary objectives (qualitative characteristics)of relevance and reliability of accounting information.

Question 16

The use of a current value model for intangible assets is:

A)Common
B)Mandatory
C)Rare
D)Prohibited

Question 17

Which of these items would meet the asset criteria of 'having future economic benefits' for a local council?

A)Air in the park
B)A bank overdraft
C)A council park
D)A and C

Question 18

An asset must have future cash generating abilities according to the IASB (AASB)Framework definition.

Question 19

Cairns argues that under the IASB standards fair value is used to measure assets on initial recognition but subsequent measurement at fair value is more rare.

Question 20

Using fair values for assets could appear less attractive to management (and more risky for auditors)during periods of rising asset values.

Question 21

Which approach does the FASB's SFAS 157 'Fair value measurements' recommend to be used in determining fair value?

A)The market approach
B)The income approach
C)The cost approach
D)All are possible approaches which the standard suggests could be used to determine fair value

Question 22

The statement concerning the measurement of financial instruments that is not true is:

A)The decision usefulness objective is an argument for valuation at fair value
B)Since the 1980's the FASB has required fair value measurement
C)The FASB has followed the IASB's lead in standard setting for financial instruments
D)IAS 39 is the standard on financial instruments

Question 23

The FASB and IASB have concluded that derivatives should be measured at:

A)Fair value
B)Cost
C)The lower of cost or fair value
D)Cost less accumulated amortisation

Question 24

Referring to examples from the current accounting standards,discuss the influence of conservatism (prudence)on the recognition of assets.

Question 25

The statement concerning auditing and fair value that is true is:

A)Using fair values for assets could appear more attractive to management and more risky for auditors during periods of rising asset values
B)Further research is needed on the auditing of fair values
C)Auditors will have to become valuers
D)All of the above are true

Question 26

"Under the IASB standards all wholly executory contracts are recognised as assets." Explain why you agree or disagree with this statement.

Question 27

Explain and discuss the arguments for and against the use of historical cost for the measurement of tangible assets.

Question 28

A valuation approach used by current IASB standards is:
I)Written down historical cost
Ii)Fair values based on exit values
Iii)Fair values based on value in use

A)i,ii
B)i,iii
C)ii,iii
D)i,ii,iii

Question 29

Explain and discuss how an asset can provide future economic benefits.Refer to both profit seeking and not-for-profit organisations.

Question 30

Explain and discuss some of the issues that arise for auditors from the IASB's move to incorporate more fair value measurements into accounting standards.