Deck 17: Regulation and the Conceptual Framework

Question 1

Select the incorrect statement concerning accounting standards.

A)They improve the comparability of financial reports
B)They only apply to companies
C)They guide the preparation of reliable financial reports
D)They evolve with changes in business requirements

Answer 1

B

Question 2

The statement relating to the Conceptual Framework's concept of understandability that is not true is:

A)Information about complex matters should be included in the reports if it is considered relevant
B)It is expected that users of financial statements will be willing to study the information with reasonable diligence
C)In preparing financial statements it should be assumed that users possess very little knowledge accounting
D)Every attempt should be made to communicate information in the most effective manner

Answer 2

In preparing financial statements it should be assumed that users possess very little knowledge accounting

Question 3

Which of these is not an aspect of the Conceptual Framework's constraint of timeliness?

A)The frequency of the reporting period,
B)The delay in publication of the financial reports after the end of the financial period
C)Preparing financial reports for a 12 month period
D)Having information available in time to influence decisions

Answer 3

Preparing financial reports for a 12 month period

Question 4

Under the Conceptual Framework,which of these is not a characteristic of a liability?

A)It is expected to result in an outflow of economic resources
B)It must be a legal debt
C)It must result from a past transaction or event
D)It must be a present obligation of the entity

Question 5

The qualitative characteristics for financial reporting contained in the Conceptual Framework are:

A)Relevance,reliability,materiality,consistency,verifiability,understandability
B)Understandability,timeliness,relevance,readability,timeliness,reliability
C)Relevance,faithful representation,comparability,understandability,verifiability,timeliness
D)Uniformity,relevance,reliability,consistency,faithful representation

Question 6

The statement relating to comparability that is true is:

A)It requires an entity,as far as possible,to use the same accounting method from year to year
B)It means a company can never change an accounting method
C)It means all firms in the same industry should use the same accounting methods
D)It means the same depreciation method must be employed for all classes of non-current assets

Question 7

The major reason for the existence of Generally Accepted Accounting Principles is:

A)To make accountants legally liable for errors
B)To increase business profits
C)To improve the standard of accounting information for decision-making
D)To create work for accountants

Question 8

The body in Australia which issues legally enforceable accounting standards that apply to companies is:

A)Australian Accounting Standards Board
B)Australian Securities and Investments Commission
C)Australian Securities Exchange
D)Financial Accounting Standards Board

Question 9

Which of these is one of the recent changes to the list of qualitative characteristics in the Conceptual Framework

A)The removal of consistency from the list
B)The addition of verifiability as an additional characteristic
C)The additional of understandability to the list
D)The removal of materiality from the list

Question 10

Which of these pairs of qualitative characteristics are most likely to be in conflict?

A)Comparability and verifiability
B)Understandability and comparability
C)Relevance and faithful representation
D)Understandability and relevance

Question 11

According to the Conceptual Framework which of these is not an essential characteristic of an asset?

A)It must have been acquired for money
B)There must be future economic benefits
C)The entity must have control over the future economic benefits
D)The event giving rise to the entity's control over the resource must have occurred

Question 12

Which is the body responsible for administering company law in Australia?

A)Australian Securities Exchange
B)Australian Accounting Standards Board
C)Australian Securities and Investments Commission
D)International Accounting Standards Board.

Question 13

Though the AASB has developed a set of accounting standards which when applied allow entities to assert that their financial statements comply with IASB standards,there are a number of ways in which Australian standards differ from international standards.How many of these are such a way?
I)The AASB has continued to issue accounting standards where no IASB equivalent exists,e.g.AASB 1031 Materiality.
Ii)Some Australian standards require more information to be disclosed than the equivalent IASB standard
Iii)Australian standards contain,where applicable,extra paragraphs relevant to entities in the public and not-for-profit sectors

A)0
B)1
C)2
D)3

Question 14

According to the Conceptual Framework information that is free from material error and bias has greater:

A)Comparability
B)Materiality
C)Faithful representativeness
D)Understandability

Question 15

GAAP stands for:

A)Government Accepted Accounting Principles
B)Generally Accepted Auditing Practices
C)Good Auditing and Accountancy Practices
D)Generally Accepted Accounting Principles

Question 16

The statement concerning the Urgent Issues Group UIG)which is untrue is:

A)It was established to give a quick solution to problems that confront accounting practitioners
B)It was dissolved in 2006
C)It issued draft accounting standards
D)The publication dealing with the GST has been retained and issued by the AASB

Question 17

The Conceptual Framework states that an important implication of the qualitative characteristic of comparability is that:

A)It will be used to predict outcomes of past,present or future events
B)It will be used to assess the representational faithfulness of the financial reports
C)Users will be informed of the accounting policies used in the preparation of the financial reports
D)If there is a choice of accounting methods one method should be chosen and then applied throughout the life of the entity

Question 18

Which of these is a fundamental purpose of accounting standards? Improving:
I)Accountant's ethics
Ii)Social accountability
Iii)Share price
Iv)Resource allocation

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

Question 19

The primary reasons for developing a conceptual framework is:

A)To enable regulators to develop accounting standards that are consistent and logically formulated
B)To provide guidance to accountants in areas where no standard exists
C)To reduce the number of accounting standards needed
D)To assist auditors

Question 20

Under SAC 1,which entity is the least likely to have users dependent on general-purpose financial reports?

A)A company with a large number of shareholders
B)A company which issues debentures to the public
C)A company which is listed on the stock exchange
D)A small proprietary company whose shareholders also run the business

Question 21

In 2000 the Australian government established the F_____________ R______________ Council to act as overseer and adviser to the standard setting body the Australian Accounting Standards Board.

Question 22

The capital maintenance concept underlying the traditional historical cost system is maintaining intact:

A)the purchasing power of equity at the beginning of the period
B)the current value of equity at the beginning of the period
C)the dollar value of equity at the beginning of the period
D)the realisable value of equity at the beginning of the period

Question 23

Under the Conceptual Framework the constraints to be imposed on the qualitative characteristics are timeliness and _________________ versus ___________________.

Question 24

Which of these is not a characteristic of equity as specified in the Conceptual Framework?

A)It ranks after liabilities as a claim on assets
B)It must be controlled by the entity
C)It is diminished by unprofitable operations
D)It cannot be calculated independently of assets and liabilities

Question 25

In the Conceptual Framework materiality is an aspect of:

A)relevance
B)faithful representation
C)verifiability
D)timeliness

Question 26

The accounting standards dealing with income are:

A)IAS 8/AASB 108
B)IAS 4/AASB 104
C)IAS 24/AASB 224
D)IAS 18/AASB 118

Question 27

Under SAC 2 g____________-p______________ financial reports are those intended to meet the information needs common to a range of users who are unable to command the preparation of reports tailored to satisfy their needs.

Question 28

Currently which body has the role of supervising real-time trading on the Australian Stock Exchange and enforcing laws against misconduct?

A)The Australian Securities Exchange
B)The Australian Accounting Standards Board
C)The Financial Reporting Council
D)The Australian Securities and Investments Commission

Question 29

As from 1 January 2005 Australia adopted i____________ accounting standards.

Question 30

Which of these statements about the objective of general purpose financial reports GPFRs)as contained in the IASBs Conceptual Framework is correct?

A)The entity perspective has been adopted when defining the objectives of GPFRs
B)The primary users of GPFRs are seen as being a diverse group including shareholders,creditors,regulators,members of the public,etc
C)GPFRs will generally satisfy user's needs for information
D)The IASB Conceptual Framework deliberately emphasises sustainability as an objective of GPFRs

Question 31

According to the Conceptual Framework which statement concerning the recognition of liabilities is not true?

A)All liabilities that meet the definition of a liability should be recognised in the accounting records
B)A recognition criteria is that it is probable that a sacrifice of future economic benefits will be required
C)A recognition criteria is that the amount of the liability must be able to be measured reliably
D)Liabilities that do not satisfy the recognition criteria can be recognised in the notes attached to the accounts

Question 32

Under IAS 20/AASB 120,Accounting for Government Grants,it is true that:

A)Government grants relating to assets are to be credited directly to equity
B)A government grant relating to an asset may be presented as a reduction in the carrying amount of the asset concerned
C)A government grant relating to income may be credited directly to equity or recognised as income systematically over the periods necessary to match them with the related costs
D)Subsidies for agricultural activities are discussed in the appendix to IAS 20/AASB 120

Question 33

According to the Conceptual Framework faithful representation does not include which of the following?

A)neutrality
B)timeliness
C)freedom from material error
D)completeness

Question 34

The simplification of complex transactions in external financial reports without sacrificing relevance or faithful representation promotes the qualitative characteristic of:

A)Timeliness
B)Relevance
C)Materiality
D)Understandability

Question 35

The true statement about general purpose financial reports GPFRs)is:

A)The IASB's Conceptual Framework and SAC 4 have different definitions of GPFRs
B)There is no clear definition of GPFRs in the IASB's Conceptual Framework
C)The IASB's Conceptual Framework and SAC2 have the same definition of GPFRs
D)Neither the IASB's conceptual Framework or SAC 2 contain a definition of GPFRs

Question 36

An entity where it is reasonable to expect the existence of users dependant on general-purpose financial reports for information to use in economic decision making is known as a:

A)Company
B)Profit making entity
C)Reporting entity
D)Non-reporting entity

Question 37

The AASB has examined a number of different accounting measurement systems that may be used in the future as alternatives to the historical cost system.Which of these is not one of those systems?

A)General price level accounting
B)Barter value accounting
C)Relative current value accounting
D)Current value accounting

Question 38

Under the Conceptual Framework 'increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity,other than those relating to contributions from equity participants',is the definition of:

A)Income
B)Asset
C)Liability
D)Expense

Question 39

The objective of financial reporting is to provide information useful in making economic d___________________.

Question 40

In the current Conceptual Framework the qualitative characteristic of reliability has been replaced by the characteristic of:

A)trustworthiness
B)truth and fairness
C)accuracy
D)faithful representation

Question 41

The p______________ of ________________ method is used in the building industry to recognise revenue under long-term construction contracts.

Question 42

R________________ means the process of incorporation of accounting information into the income statement and the balance sheet.

Question 43

Unwarranted changes in methods of inventory valuation breach the Conceptual Framework's qualitative characteristic of c___________________.

Question 44

An a_______________ is defined in the Conceptual Framework as a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.