Question 1

The IASB Conceptual Framework is considered to be an International Accounting Standards Board (IASB)standard.

Accepted Answer

A) True 
 B)False

Question 2

A separate recognition criteria for equity is not set forth in the Conceptual Framework because it represents a residual interest in the assets of an entity.

Accepted Answer

A) True 
 B)False

Question 3

Transactions or events that cannot be linked to a 'cost' or a 'market price' are not recognised.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements most accurately reflects the qualitative characteristics of financial information in the IASB Conceptual Framework?

Accepted Answer

A) These attributes or qualities determine whether an entity is considered to be a reporting entity. 
B) These are attributes or qualities that financial information should possess if it is to be useful for such decision making. 
C) These attributes or qualities satisfy the definition of elements in the financial reports. 
D) All of the given answers are correct.

Question 5

When a standard restricts the number of accounting methods to be used to account for a particular accounting issue,it is promoting the qualitative characteristic of ______________?

Accepted Answer

A) timeliness 
B) prudence 
C) understandability 
D) comparability

Question 6

Identify and discuss the fundamental qualitative characteristics of financial information identified in the IASB Conceptual Framework for Financial Reporting.

Accepted Answer

The answer of Identify and discuss the fundamental qualitative characteristics...

Question 7

Which of the following accounting policies is an example of costs versus benefits constraint being exercised in the disclosure of financial information?

Accepted Answer

A) Inventory is valued at lower of cost or market. 
B) Property, plant and equipment are appraised and revalued every three years. 
C) Biological assets are stated at fair value unless the fair value cannot be measured reliably. 
D) Research and development costs are expensed as incurred.

Question 8

Which of the following factors should be considered in order to determine whether an entity is a reporting entity when it is not obvious that users exist who would be dependent on the financial reports of the entity?

Accepted Answer

A) separation of management from those with economic interest in the entity 
B) economic or political importance/influence 
C) financial characteristics 
D) separation of management from those with economic interest in the entity and economic or political importance/influence

Question 9

Mr and Mrs K Urban are partners in Urban Plc,a music shop with sales revenue of €5 000 000 per annum,total assets of €10 000 000 and employees totalling 15.Urban Plc is:

Accepted Answer

A) a reporting entity because there are at least two users of a financial report. 
B) not likely to be a reporting entity because it is unlikely to have users dependent on its financial reports. 
C) likely to be a reporting entity because there are two shareholders and it is an exempt proprietary entity. 
D) not a reporting entity because small proprietary companies are frequently not considered reporting entities.

Question 10

The Conceptual Framework's recognition criteria provides that 'an asset is recognised in the balance sheet when it is ________ that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured __________'.

Accepted Answer

A) possible; reliably 
B) probable; accurately 
C) probable; reliably 
D) certain; accurately

Question 11

This question is subjective.Which of the following statements might be most appropriate in terms of providing guidance on determining a materiality level?

Accepted Answer

A) If the amount is equal or greater than 10% of the appropriate base amount, the item is material. 
B) If the amount is equal or greater than 10% of the appropriate base amount, the item is immaterial. 
C) If the amount is equal or less than 5% of the appropriate base amount, the item is material 
D) If the amount is equal or greater than 10% of the appropriate base amount, the item is material; if the amount is equal or less than 5% of the appropriate base amount, the item is immaterial.

Question 12

The IASB and US FASB are jointly developing a common conceptual framework to guide both standard setters in developing separate standards for their constituents.

Accepted Answer

A) True 
 B)False

Question 13

One of the benefits of the Conceptual Framework is that it provides parameters for the exercise of judgement in resolving accounting issues.

Accepted Answer

A) True 
 B)False

Question 14

The Conceptual Framework identifies two aspects to financial information that are 'relevant'.These are:

Accepted Answer

A) verifiability and understandability. 
B) predictability and verifiability. 
C) neutrality and verifiability. 
D) prudence and neutrality.

Question 15

The accountant of Broken Bay Plc decided to retain the historical cost of the entity's intangible assets because it was difficult to obtain fair value of these assets.This action is consistent with ____________.

Accepted Answer

A) substance over form 
B) balancing of relevance and faithful representation 
C) accrual accounting 
D) cash accounting

Question 16

Which of the following statement(s)is/are true with respect to materiality?

Accepted Answer

A) Materiality refers to the notion that an item need not be recognised in the financial reports. 
B) Materiality is a primary qualitative characteristic. 
C) Materiality relates to financial information where its omission or misstatement could influence the economic decisions of users. 
D) Materiality relates to financial information where its omission or misstatement could influence the economic decisions that users make about a specific reporting entity.

Question 17

James Cook Plc bought a piece of land 10 years ago and the market value of this property is now worth five times its purchase cost.The accountant suggested that James Cook Plc should revalue the asset.This notion is consistent with the qualitative characteristic of:

Accepted Answer

A) relevance. 
B) faithful representation. 
C) understandability. 
D) comparability.

Question 18

The UK Accounting Standards Board (ASB)retained the use of its own conceptual framework even after harmonisation.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following are considered in the IASB Conceptual Framework as primary qualitative characteristics?

Accepted Answer

A) relevance, faithful representation, materiality and comparability 
B) relevance, faithful representation, timeliness and understandability 
C) relevance, faithful representation, understandability and comparability 
D) materiality, faithful representation, understandability and comparability

Question 20

'Liabilities that are legally enforceable and equitably or constructively unavoidable must be recognised if they can be measured reliably'.Discuss.

Accepted Answer

The answer of 'Liabilities that are legally enforceable and equitably...

Exam 2: The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

The IASB Conceptual Framework is considered to be an International Accounting Standards Board (IASB)standard.

A separate recognition criteria for equity is not set forth in the Conceptual Framework because it represents a residual interest in the assets of an entity.

Transactions or events that cannot be linked to a 'cost' or a 'market price' are not recognised.

Which of the following statements most accurately reflects the qualitative characteristics of financial information in the IASB Conceptual Framework?

When a standard restricts the number of accounting methods to be used to account for a particular accounting issue,it is promoting the qualitative characteristic of ______________?

Identify and discuss the fundamental qualitative characteristics of financial information identified in the IASB Conceptual Framework for Financial Reporting.

Which of the following accounting policies is an example of costs versus benefits constraint being exercised in the disclosure of financial information?

Which of the following factors should be considered in order to determine whether an entity is a reporting entity when it is not obvious that users exist who would be dependent on the financial reports of the entity?

Mr and Mrs K Urban are partners in Urban Plc,a music shop with sales revenue of €5 000 000 per annum,total assets of €10 000 000 and employees totalling 15.Urban Plc is:

The Conceptual Framework's recognition criteria provides that 'an asset is recognised in the balance sheet when it is that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured __'.

This question is subjective.Which of the following statements might be most appropriate in terms of providing guidance on determining a materiality level?

The IASB and US FASB are jointly developing a common conceptual framework to guide both standard setters in developing separate standards for their constituents.

One of the benefits of the Conceptual Framework is that it provides parameters for the exercise of judgement in resolving accounting issues.

The Conceptual Framework identifies two aspects to financial information that are 'relevant'.These are:

The accountant of Broken Bay Plc decided to retain the historical cost of the entity's intangible assets because it was difficult to obtain fair value of these assets.This action is consistent with ____________.

Which of the following statement(s) is/are true with respect to materiality?

James Cook Plc bought a piece of land 10 years ago and the market value of this property is now worth five times its purchase cost.The accountant suggested that James Cook Plc should revalue the asset.This notion is consistent with the qualitative characteristic of:

The UK Accounting Standards Board (ASB)retained the use of its own conceptual framework even after harmonisation.

Which of the following are considered in the IASB Conceptual Framework as primary qualitative characteristics?

'Liabilities that are legally enforceable and equitably or constructively unavoidable must be recognised if they can be measured reliably'.Discuss.