Question 1

According to the conceptual framework the primary objective of financial information is

Accepted Answer

A)   Decision Usefulness
B)   Prediction
C)   Stewardship
D)   Accountability A

Question 2

Which of the following statements is correct in relation to the assumptions to be made when preparing financial reports?

Accepted Answer

A)   The conceptual framework requires that several assumptions be made when preparing financial reports
B)   There are no assumptions to be made when preparing financial reports
C)   There is one underlying assumption which is that financial reports are prepared on a going concern basis
D)   There is an assumption that more information is better than less C

Question 3

Which of the following are key parts of the definition of an asset? I. Probability
II. Control
III. Ownership
IV. Past Transaction or Event
V. Reliable Measurement
VI. Future Economic Benefits

Accepted Answer

A)   I., III. & VI.
B)   II., IV. & V.
C)   III., V. & VI.
D)   II., IV. & VI. D

Question 4

A key aspect of relevance is that information is

Accepted Answer

A)   Complete
B)   Neutral
C)   Forward looking
D)   Material

Question 5

An element is considered probable if the chance of the flow associated with it occuring is greater than:

Accepted Answer

A)   30%
B)   50%
C)   75%
D)   90%

Question 6

The conceptual framework states that it is concerned with general purpose financial reports. What are general purpose financial reports?

Accepted Answer

A)   Financial reports that are tailored to the particular information needs of users
B)   Financial reports intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs
C)   Financial reports which do not meet the needs of users
D)   None of the above

Question 7

Which of the following elements in the financial statement is NOT defined by reference to other elements?

Accepted Answer

A)   Equity
B)   Expenses
C)   Liabilities
D)   Income

Question 8

The four enhancing qualitative characteristics recognised by the conceptual framework are:

Accepted Answer

A)   Materiality, comparability, timeliness, cost versus benefit
B)   Relevance, materiality, reliability, comparability
C)   Understandability, verifiability, timeliness, comparability
D)   Understandability, cost versus benefit, verifiability, comparability

Question 9

The Conceptual Framework identifies a limited range of primary users of financial statements. Which of the following best describes these users?

Accepted Answer

A)   Current investors
B)   Existing and potential investors, Lenders, Other creditors
C)   Investors, Creditors, Overseers, Customers, General Public
D)   Resource providers

Question 10

It is argued that the conceptual framework is descriptive, not prescriptive, because:

Accepted Answer

A)   Its purpose is to try to improve practice rather than simply reflecting and giving approval to existing accounting principles and practice
B)   It describes what should happen in practice
C)   It simply describes accounting principles as currently practiced and applied
D)   None of the above

Question 11

Faithfull representation has been criticised because

Accepted Answer

A)   It does not reflect the inherent uncertainty in accounting
B)   It is not an important issue for accountants
C)   It does not capture the true value of accounting transactions
D)   It leads to a single measurement model dominating accounting

Question 12

Which of these is not a criticism of conceptual framework projects?

Accepted Answer

A)   The measurement of the elements of financial reporting is too highly specified
B)   It is ambiguous and open to interpretation
C)   It is too descriptive
D)   Faithful representation and relevance conflict with each other

Question 13

Accounting standards are seen to be political because

Accepted Answer

A)   They can create wealth transfers between different groups in society
B)   They can affect the competitiveness of organisations
C)   They can influence perceptions about organisations
D)   All of the above

Question 14

The constraints on financial reporting identified under the conceptual framework are:

Accepted Answer

A)   Cost versus benefit
B)   Timeliness and neutrality
C)   Understandability and materiality
D)   Understandability and cost versus benefit

Question 15

The Conceptual Framework:

Accepted Answer

A)   Is based on the one Pacioli included in Particularis de Computis et Scripturis
B)   Is used by every country that has adopted the International Accounting Standards
C)   Was a joint project between the AASB and FASB
D)   Has remained unchanged for over 20 years

Question 16

How does the conceptual framework differ from an accounting standard?

Accepted Answer

A)   The principles in the conceptual framework are specific in nature while accounting standards provide more general requirements for financial reporting
B)   The principles in the conceptual framework are general concepts while accounting standards provide specific requirements for a particular area of financial reporting
C)   The principles in the conceptual framework are designed to provide guidance and apply to a limited range of decisions relating to the preparation of financial reports while accounting standards apply to a wider range of decisions relating to the preparation of financial reports
D)   The principles in the conceptual framework provide specific requirements for a particular area of financial reporting while accounting standards are designed to provide general guidance

Question 17

The accounting conceptual framework is what kind of theory?

Accepted Answer

A)   Abstract
B)   Normative
C)   Positive
D)   Emergent

Question 18

Which of the following questions does the Conceptual Framework NOT answer?

Accepted Answer

A)   Who are financial reports for
B)   What is the purpose of the financial reports
C)   What type of information should be included in financial reports
D)   What measurement basis should be used in financial reports

Question 19

A key political benefit that may arise from a conceptual framework in accounting is:

Accepted Answer

A)   Individuals and groups are able to influence the standard setters
B)   Protection of the professional status of accountants and accounting
C)   Prevention of political interference in setting accounting standards
D)   All of the above

Question 20

According to the Conceptual Framework which of the following are included in the fundamental qualitative characteristics that accounting information should have? I. Relevance
II. Reliability
III. Faithful Representation
IV. Understandability

Accepted Answer

A)   I.
B)   I. and II.
C)   II. and III.
D)   I., II., III. and IV.

Exam 2: The Conceptual Framework for Financial Reporting