Deck 3: International Convergence of Financial Reporting

Question 1

The "Seventh Directive" issued by the European Commission is a statement to the European Union (EU) members concerning:

A) adoption of the euro as the currency used throughout the EU.
B) consolidated financial statements.
C) rules for valuation, financial statement disclosures, and financial statement format.
D) authority of the European Commission to pass laws.

Answer 1

B

Question 2

From a practical standpoint, what is the goal of accounting standards harmonization?

A) Creating one set of standards used throughout the world
B) Reducing the conflict among national accounting standards
C) Producing accounting standards that are unique for each country
D) Forcing compliance with IASB regulations

Answer 2

B

Question 3

In preparation for admission to the European Union, Hungary, Poland, and the Czech Republic passed new accounting laws based on EU Directives. How were these new laws different from their previous accounting laws?

A) The new laws are easier to enforce than the previous laws.
B) The new accounting regulations are written in English, whereas the earlier accounting standards were written in Russian.
C) The new laws are less flexible than their earlier accounting laws.
D) The new laws are market-oriented whereas their earlier accounting laws were Soviet-style.

Answer 3

D

Question 4

De jure harmonization refers to the process of:

A) making accounting practices consistent across countries.
B) making accounting regulations consistent internationally.
C) resolving accounting differences through jury trials.
D) eliminating the need to have different accounting methods.

Question 5

The early (1973-1988) harmonization efforts of the International Accounting Standards Committee (IASC) created standards that have been described as a "lowest-common-denominator" approach. What was the effect of these first international accounting standards?

A) The IASC standards accommodated existing accounting practices in various countries.
B) Comparability of financial statements across countries was achieved.
C) It resulted in few companies being in compliance with IASC standards.
D) All of the above

Question 6

Which of the following items is considered to be the most significant impediment to accounting convergence?

A) Nationalism
B) Lack of accounting knowledge
C) Language differences
D) High cost of convergence

Question 7

In addition to the International Accounting Standards Committee (IASC), which of the following organizations was considered to be one of the two most important forces in efforts to harmonize accounting standards?

A) U.S. Financial Accounting Standards Board (FASB)
B) United Nations (UN)
C) North Atlantic Treaty Organization (NATO)
D) European Union (EU)

Question 8

Which of the following is NOT an objective of the International Accounting Standards Board?

A) To establish worldwide uniformity of accounting practice
B) To develop a single set of enforceable global accounting standards
C) To promote the use and application of global accounting standards
D) To encourage convergence of national accounting standards and international accounting standards

Question 9

Which of the following statements is true of the International Accounting Standards Board (IASB)?

A) The Board consists of 16 members.
B) The Board should contain 6 part-time members.
C) At least 13 members of the Board must have experience as auditors.
D) All members of the Board should be from a single country.

Question 10

Of the 16 members of the International Accounting Standards Board (IASB), how many work for the board on a full-time basis?

A) 8
B) 13
C) 10
D) 0

Question 11

It has been said that the addition of 10 new members to the European Union (EU) in 2004 is likely to significantly change the dynamics within the EU. What was the explanation given for this statement?

A) The EU is getting too large to manage effectively.
B) The members added in 2004 have very different political and economic traditions than the 15 members that joined before 2004.
C) The members added in 2004 have more economic power than the members that joined the EU between 1957 and 1995.
D) The purchasing power of the EU was weakened by the addition of additional members.

Question 12

Which of the following statements is true about accounting convergence?

A) Convergence is a synonym for harmonization.
B) Convergence is the opposite of standardization.
C) Convergence, unlike harmonization, takes place over a period of time.
D) Convergence means developing high-quality standards in partnership with national standard-setters.

Question 13

According to Sir Bryan Carsberg, former IASC secretary-general, what is the most significant cost of accounting diversity?

A) The time expended by accountants to create multiple sets of financial statements conforming to different national standards
B) The cost of the IASB to regulate compliance with many national accounting standards
C) It may limit the effectiveness of the international capital markets
D) The resources used by countries in legislating different sets of accounting standards

Question 14

Why did the European Commission stop issuing directives related to accounting in 1990?

A) The EU was leaving the formulation of accounting standards up to the IASC.
B) The European Commission had finished the task of formulating accounting standards for the European Union.
C) Accounting harmonization had been completed.
D) The Commission found that its directives were unenforceable.

Question 15

Harmonization of accounting standards:

A) is the same as convergence of accounting standards.
B) always ensures resulting of comparable financial statements internationally.
C) forces accounting differences to be resolved through litigation.
D) refers to the reduction of alternatives while retaining a high degree of flexibility in accounting practices.

Question 16

The "Fourth Directive" issued by the European Commission, which administers the European Union (EU), deals with which of the following?

A) Adoption of the euro as the currency used throughout the EU
B) Consolidated financial statements
C) Rules for valuation, disclosures requirements, and the format of financial statements
D) Authority of the European Commission to pass laws

Question 17

Which of the following statements is believed to be true about accounting convergence by proponents of convergence?

A) Convergence would not affect the feelings of nationalism.
B) Convergence is desirable because there is very little difference among capital markets in different countries.
C) Convergence would help to raise the quality of accounting practices internationally.
D) None of the above statements is true.

Question 18

The second phase (1989-1993) of the IASC's efforts to harmonize accounting standards was aimed at:

A) making international accounting standards more flexible.
B) creating greater financial statement comparability across countries.
C) adding new alternatives for accounting practices desired by the international community.
D) strengthening the enforcement power of the IASC.

Question 19

De facto harmonization refers to the process of:

A) making accounting practices consistent across countries.
B) making accounting regulations consistent internationally.
C) resolving accounting differences through litigation.
D) creating one set of accounting standards.

Question 20

Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia joined the European Union in 2004. Besides membership in the EU, what do these countries have in common?

A) They share a common language.
B) They were members of the former Soviet bloc.
C) All were under the political control of Germany until the early 1960's.
D) They were former British colonies until after World War II.

Question 21

How many trustees of the IFRS Foundation will normally be senior partners of prominent international accounting firms?

A) 0
B) 2
C) 5
D) 10

Question 22

The IASB's Framework for Preparation and Presentation of Financial Statements (1989) implies that the most important group of users is:

A) government.
B) general public.
C) creditors.
D) investors.

Question 23

The IASB is organized under an independent entity called:

A) the SEC.
B) the AFL.
C) the IFRSF.
D) INTERPOL.

Question 24

What is the intent of IFRS 1?

A) To establish the guidelines for financial statement presentation
B) To provide the working definitions of accounting elements
C) To provide guidance on first-time application of IFRS
D) To provide the framework for setting international accounting standards

Question 25

According to the IASB, what is needed for IFRS to work effectively?

A) Commitment from auditors to resist client pressures.
B) Professional judgment in the public interest on the part of companies and auditors.
C) Financial statement preparers must produce reports that faithfully represent all transactions.
D) All of the above are conditions for effective standards.

Question 26

According to the Framework for Preparation and Presentation of Financial Statements of the IASB, what is the definition of income?

A) Assets minus liabilities
B) Revenue minus expenses
C) Increase in equity (other than from transactions with owners)
D) Inflow of resources with future economic benefit

Question 27

Which of the following statements is true about the IASB's approach to accounting standard setting?

A) The IASB approach is very similar to the rules-oriented basis favored by the FASB in the United States.
B) The IASB uses a principles-based approach to standards formulation.
C) The IASB pronouncements have been called a "cookbook" of accounting standards.
D) The Sarbanes-Oxley Act requires the IASB to move toward the approach for standard setting used by the FASB.

Question 28

What is the primary focus of IAS 1?

A) To establish the guidelines for financial statement presentation
B) To provide guidance to first-time adopters of IFRS issued by the IASB
C) To establish the framework of guidelines to be used by IASB in setting accounting standards
D) None of the above

Question 29

Which of the following qualitative characteristics make financial statement information useful?

A) Relevance
B) Understandability
C) Reliability
D) All of the above.

Question 30

What language is used to develop the International Financial Reporting Standards (IFRS)?

A) French
B) German
C) English
D) Spanish

Question 31

In which of the following countries is the use of IFRS NOT allowed for domestic companies listed on its stock exchanges?

A) United Kingdom
B) Yugoslavia
C) Australia
D) United States

Question 32

Who was the first chairman of the International Accounting Standards Board?

A) Sir Walter Raleigh
B) Sir David Tweedie
C) Sir Paul McCartney
D) Sir Bryan Carsberg

Question 33

Why does the IASB believe that a principles-based approach to standard setting is superior to a rules-based approach?

A) Detailed guidance or rules encourage accountants to look for ways around the rules rather than trying to provide useful information.
B) Principles-based standard setting is less costly to undertake than rules-based standard formulation.
C) It is desirable to have all corporations in all countries using the same accounting practice.
D) A conceptual framework for standard setting has demonstrated to encourage the greatest economic development.

Question 34

According to the Framework for Preparation and Presentation of Financial Statements of the IASB, which of the following is NOT required for asset recognition?

A) Control of the resource
B) Ownership of the resource
C) Future economic benefits
D) Reliable measurement of the cost or value of the resource

Question 35

The International Accounting Standards Board was preceded by:

A) the IOSCO.
B) the ASEAN.
C) the IASC.
D) the NRC.

Question 36

What basis does the International Accounting Standards Board use in developing IFRS?

A) Detailed rules to govern accounting practice
B) A framework for deriving general principles
C) Typical tax laws of western nations
D) Exceptions or unusual circumstances that require special attention

Question 37

Which of the following is true of assets?

A) Assets should be recognized only when it is probable that future economic benefits will flow to the enterprise.
B) Assets should be recognized when it is probable that an outflow of resources will be required to settle them.
C) Asset is defined as decrease in equity, other than from transactions with owners.
D) A resource must be owned for it to be recognized an asset of the enterprise.

Question 38

The IASB's Framework for the Preparation and Presentation of Financial Statements (1989) establishes:

A) the required practices that should be followed by accountants in preparing financial statements.
B) the structure, content, and format of financial statements.
C) sanctions for failure to comply with the IASB standards.
D) the concepts to be used in formulating international accounting standards.

Question 39

To create an appropriate mix of members of the IASB, since 2012 the board includes:

A) eight auditors.
B) eight academic representatives.
C) four members of the FASB.
D) a diverse geographical balance of members.

Question 40

Which of the following is NOT true of the due process followed by the IASB in formulating International Financial Reporting Standards?

A) A period of public comment is provided after discussion papers are prepared.
B) Standards are approved by a unanimous vote of the 16-member board.
C) Exposure drafts are published prior to taking a vote of the board.
D) National accounting standards and practices are studied before preparing exposure drafts.

Question 41

Which of the following statements is NOT a way in which a country might adopt IFRS?

A) By requiring all companies in that country to adopt IFRS.
B) By permitting foreign companies listed on domestic exchanges to adopt IFRS.
C) By force of IASB to adopt of IFRS.
D) By requiring domestic companies that list on foreign exchanges to adopt IFRS.

Question 42

In November 2007, which of the following organizations removed the requirement that foreign private issuers using IFRS reconcile their financial statements to U.S. GAAP?

A) IASB
B) EU
C) SEC
D) FASB

Question 43

Which of the following groups is responsible for translating International Financial Reporting Standards into languages other than the official language of the IASB?

A) The International Accounting Standards Board
B) The International Accounting Standards Committee Foundation
C) The United Nations
D) The national accountancy bodies of individual countries

Question 44

Which of the following is a difference between the U.S. and other Anglo-Saxon countries in terms of accounting standards?

A) The U.S. does not adhere to the "true and fair view" approach.
B) The U.S. is more private sector-oriented.
C) The U.S. always follows a conceptual framework when developing accounting standards.
D) The U.S. standards are becoming more rigid than the U.K. standards.

Question 45

What is the role of the liaison members of the International Accounting Standards Board?

A) To facilitate information exchange and cooperation between the FASB and the IASB
B) To eliminate the political influences on the IASB and national accounting bodies
C) To enforce adherence to the fundamental principles of the IASB
D) All of the above

Question 46

What is Anglo-American Accounting?

A) It is an association of British and American accounting regulatory agencies.
B) The accounting systems used in the United States, United Kingdom, and other English-speaking countries.
C) This refers to the basis used by the IASB to judge the appropriateness of international accounting standards.
D) All of the above are true.

Question 47

Which of the following statements is NOT true about Anglo-Saxon Accounting?

A) There is a strong reliance on professional judgment.
B) Financial reporting focuses on the firm with an investor orientation.
C) There is a strong emphasis on measurement of taxable income.
D) Principle of fair presentation is predominant in financial reporting.

Question 48

Which of the following statements is NOT true about Anglo-Saxon Accounting?

A) There is a strong reliance on professional judgment.
B) There is an agreement on the interpretation of the principle of fair presentation.
C) There is a stronger emphasis on substance of reports rather than the form of reports.
D) Audits report on the adherence to the principle of fair presentation.

Question 49

Which of the following is NOT a major concern related to convergence of international accounting standards?

A) The complicated nature of particular standards
B) The tax-driven nature of the national accounting regime
C) An overload of guidance on the first-time application of IFRS
D) IFRS language translation difficulties

Question 50

What was the "Norwalk Agreement?"

A) A pledge between the Financial Accounting Standards Board in the U.S. and the IASB to make their reporting standards compatible.
B) A concession by the Financial Accounting Standards Board in the U.S. to adopt IFRS as soon as possible.
C) It is a treaty between the United States and the European Union to make their accounting standards converge.
D) It was an agreement signed in Norwalk, Connecticut in 2002 to make English the official language of the IASB.

Question 51

According to IAS 1, which of the following is the overriding principle that must be followed while preparing IFRS-based financial statements?

A) Going concern
B) Fair presentation
C) Revenue recognition
D) Comparative information

Question 52

According to the Norwalk Agreement, the FASB will monitor:

A) all IASB projects.
B) IASB projects according to their level of interest in the topic.
C) no IASB projects, since the IASB is capable of self-monitoring.
D) only those projects dealing with internationally complex issues.

Question 53

What is the official language of the IASB?

A) English
B) French
C) Spanish
D) German

Question 54

Which of the following statements is true of IFRS 1?

A) It does not permit the recognition of intangible assets in balance sheets.
B) After its issuance in July 2001, it has not been amended as of yet.
C) It deals primarily with fair value measurement of assets.
D) It provides exemptions to complying with IFRS in specific areas.

Question 55

The IASB has permitted the translation of International Financial Reporting Standards (IFRS) into how many languages?

A) None. They are only written in the official language of the IASB.
B) More than 30
C) More than 100
D) Only six languages: Chinese, English, German, Japanese, Russian, and Spanish