Deck 6: Products of the Financial Reporting Process

Question 1

Which of the following intellectual capital could be included in the Statement of Financial Position?

A) Training of programmers employed by a company
B) Development of software by the company for internal use
C) Development of software by the company for external use
D) None of the above

Answer 1

C

Question 2

Income smoothing

A) Aims to produce a steady growth in the profit stream
B) Transfers wealth from new shareholders to management
C) Is only possible when sufficient profits are regularly made
D) All of the above

Answer 2

D

Question 3

Corporate social responsibility

A) Is concerned about the environmental impact of organisations
B) Suggests that companies can build shareholder value by engaging other stakeholders
C) Still means organisations should pursue profit
D) All of the above.

Answer 3

D

Question 4

Intangible assets are defined as

A) One-sided financial assets
B) Unidentifiable assets without physical
C) Identifiable non-monetary assets without physical substance
D) All of the above

Question 5

What is the key element of the IASB definition of the reporting entity?

A) The existence of a broad range of users who want information
B) The legal requirements of the country in which the entity resides
C) The existence of investors and creditors who cannot directly obtain information
D) The existence of scarce resources

Question 6

Which of the following is an argument for more flexible reporting periods?

A) It makes it less attractive for entities to manipulate profits
B) It enhances comparability
C) It makes dividend calculation easier
D) It is widely supported

Question 7

Which of the following is NOT an argument for a standardised annual reporting period?

A) It allows investors to compare entities more easily
B) It is necessary to calculate an annual dividend
C) Most businesses operate on a natural 12 month cycle
D) Various laws require regular information be produced by the entity

Question 8

The annual report

A) May have significant additional voluntary disclosure in the financial statements
B) Is used for impression management
C) Is thought to have little influence on stakeholder perceptions
D) Is not thought to be an important information avenue for organisations

Question 9

Legitimacy theory suggests that corporate social disclosure will be used to

A) Signal deeply held ethical values of the entity
B) Manage the concerns of key stakeholders
C) Disclose all firm activities, good or bad
D) The minimal degree possible

Question 10

What is NOT one of the key elements of control?

A) Ownership
B) Variable returns
C) Influence over returns
D) None of the above, i.e. they are all elements of control

Question 11

Earnings Management:

A) is always illegal
B) depends on timing difference between cash and accrual accounting
C) is always bad for shareholders
D) None of the above

Question 12

Extensible business reporting language (XBRL) is expected to

A) Benefit all businesses, large to small
B) Ease the burden of reporting to governments
C) Facilitate better corporate analysis
D) All of the above

Question 13

Approximately what percentage of the real value of companies is thought to be the result of intangible assets?

A) 10%
B) 30%
C) 50%
D) 70%

Question 14

Which of the following has NOT been identified as a reason that management might voluntarily disclose information in annual reports

A) To mislead competitors
B) To manage powerful stakeholders
C) To win reporting awards
D) To forestall regulation

Question 15

Which of the following is specifically prohibited from recognition as an intangible asset according to AASB138?

A) Internally generated brands
B) Research
C) Training
D) All of the above

Question 16

Manipulation of reported earnings:

A) Can be both legal and illegal
B) Includes income smoothing
C) Affects wealth transfers between the company and others
D) All of the above

Question 17

Annual reports contain many financial graphics, it has been noted that

A) They are mostly unhelpful in summarising data
B) They are irrelevant to most users
C) They are frequently distorted to improve perceptions of performance
D) All of the above

Question 18

The kinds of information likely to be included in the annual report includes

A) Corporate governance
B) Environmental performance
C) Occupational health and safety disclosures
D) All of the above

Question 19

Pro forma reports

A) Are simply IFRS compliant reports
B) Are GAAP compliant reports
C) Usually show a lower profit figure than those prepares in accordance with accounting standards
D) Usually show a higher profit figure than those prepares in accordance with accounting standards

Question 20

AASB 134 Interim Reporting mandates:

A) The minimum contents of interim financial reports
B) Who must prepare interim financial reports
C) That interim financial reports should be prepared at least once per year
D) All of the above