Deck 1: Financial Reporting and Accounting Standards

Question 1

International Accounting Standards are no longer considered applicable because they have been replaced by International Financial Reporting Standards.

Answer 1

False

Question 2

The two major standard-setting organizations in the world are the International Accounting Standards Board (IASB) and International Organization of Securities Commission (IOSCO).

Answer 2

False

Question 3

While objectives for financial reporting exist on an informal basis, no formal objectives have been adopted.

Answer 3

False

Question 4

International Financial Reporting Standards preceded International Accounting Standards.

Question 5

Financial statements are the principal means through which financial information is communicated to those outside an enterprise.

Question 6

An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling securities and obtaining and granting credit.

Question 7

In order to provide information that is useful in decision making and capital allocation, the International Financial Reporting Standards (IFRS) requires all companies to use a common currency.

Question 8

The major financial statements used under International Financial Reporting Standards (IFRS) include the statement of changes in financial position and the statement of stockholders' equity.

Question 9

The passage of a new International Financial Reporting Standards Statement requires the support of ten of the sixteen board members.

Question 10

The International Accounting Standards Board (IASB) follows specific steps in developing International Financial Reporting Standards (IFRS); the first step in the process is holding a public hearing.

Question 11

Over 115 countries require or permit use of International Financial Reporting Standards (IFRS).

Question 12

Capital markets are increasingly integrated and companies have greater flexibility in deciding where to raise capital.

Question 13

The standard-setting structure used by the International Accounting Standards Board is very similar to that used by the Financial Accounting Standards Board.

Question 14

Users of the financial information provided by a company use that information to make capital allocation decisions.

Question 15

IFRS is considered more comprehensive than U.S.GAAP and the standards contain more implementation guidance than U.S.GAAP.

Question 16

The standards issued by various standard-setting organizations around the world include standards that are profit-oriented and investor-focused.

Question 17

The rules-based standards of IASB are more detailed than the simpler, principles-based standards of U.S.GAAP.

Question 18

One weakness of accrual accounting is that it does not provide a good indication of the enterprise's present and continuing ability to generate favorable cash flows.

Question 19

The International Organization of Securities Commissions (IOSCO) sets accounting standards for those countries which have not yet adopted IFRS.

Question 20

The International Accounting Standards Board issues International Financial Reporting Standards.

Question 21

Which of the following statements is true?

A)Over 115 countries require or permit use of International Financial Reporting Standards (IFRS).
B)Canada is the most significant holdout from use of International Financial Reporting Standards (IFRS).
C)Nearly 50% of investors in the United States own foreign securities, either directly or through funds.
D)To facilitate efficient capital allocation, investors need relevant information stated in a common currency.

Question 22

How does accounting help the capital allocation process attract investment capital?

A)Provides timely, relevant information.
B)Encourages innovation.
C)Promotes productivity.
D)Provides timely, relevant information and encourages innovation.

Question 23

All the following are differences between financial and managerial accounting in how accounting information is used except to

A)plan and control company's operations.
B)decide whether to invest in the company.
C)evaluate borrowing capacity to determine the extent of a loan to grant.
D)All of these answers are differences.

Question 24

Financial reports in the early 21st century did not provide any information about a company's soft assets.

Question 25

The financial statements most frequently provided include all of the following except the

A)statement of financial position.
B)income statement.
C)statement of cash flows.
D)statement of retained earnings.

Question 26

A unanimous vote by all Board members is needed to issue a new International Financial Reporting Standard (IFRS).

Question 27

The International Accounting Standards Board (IASB) has 16 members and each member of the IASB must come from a different country.

Question 28

Interpretations issued by the IFRS Interpretations Committee are more authoritative than IASB Standards and Interpretations.

Question 29

Significant financial reporting issues facing global financial reporting and efficient capital allocation include how to provide backward-looking information.

Question 30

U.S.and European regulators have agreed to recognize each other's standards for listing on the various world securities exchanges.

Question 31

The IASB relies primarily on the International Organization of Securities Commissions (IOSCO) for regulation and enforcement of its standards.

Question 32

The major financial statements include all of the following except:

A)Statement of financial position.
B)Statement of changes in financial position.
C)Statement of comprehensive income.
D)Statement of changes in equity.

Question 33

IFRS are a product of careful logic or empirical findings and are not influenced by political action.

Question 34

Politics and political pressure in establishing IFRS is a negative force.

Question 35

The expectations gap is caused by what the public thinks accountants should be doing and what accountants think they can do.

Question 36

IFRS tends to be simpler and more flexible in the accounting and disclosure requirements than U.S.GAAP.

Question 37

Accounting standards are now less likely to require the recording or disclosure of fair value information due to its inherent subjectivity.

Question 38

The International Accounting Standards Board (IASB) is a regulatory agency with enforcement powers for its International Financial Reporting Standards (IFRS).

Question 39

International financial reporting interpretations (issued by the International Accounting Standards Board) are considered authoritative and must be followed.

Question 40

Ethical issues in financial accounting are governed by the AICPA.

Question 41

The information provided by financial reporting pertains to

A)individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers.
B)business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers.
C)individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers.
D)an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.

Question 42

In the past, many countries have relied on their own standard-setting organizations.The standards issued by these various standard-setting organizations around the world include

A)Tax-oriented standards.
B)Business-based standards.
C)Principles-based standards.
D)All of these answers are correct.

Question 43

Users of financial reports include all of the following except:

A)creditors.
B)government agencies.
C)unions.
D)All of these are users.

Question 44

An effective capital allocation process

A)promotes productivity.
B)encourages innovation.
C)provides an efficient market for buying and selling securities.
D)All of these answers are correct.

Question 45

Accrual accounting is used because

A)cash flows are considered less important.
B)it provides a better indication of ability to generate cash flows than the cash basis.
C)it recognizes revenues when cash is received and expenses when cash is paid.
D)None of these answers are correct.

Question 46

The International Accounting Standards Board (IASB) follows specific steps in developing International Financial Reporting Standards (IFRS).Place the following steps in the correct order:
1) Research and analysis conducted; preliminary views of pros and cons issued.
2) Topics identified and placed on the agenda.
3) Board evaluates responses, final standard issued.
4) Public hearing on proposed standard
5) Board evaluates research, issues exposure draft.

A)1, 2, 3, 4, 5
B)2, 1, 4, 5, 3
C)1, 2, 5, 4, 3
D)1, 2, 5, 3, 4

Question 47

One element of the objective of financial reporting is to provide

A)information about the investors in the business entity.
B)information about the liquidation values of the resources held by the enterprise.
C)information that is useful in assessing cash flow prospects.
D)information that will attract new investors.

Question 48

General-purpose financial statements are the product of

A)financial accounting.
B)managerial accounting.
C)both financial and managerial accounting.
D)neither financial nor managerial accounting.

Question 49

What is the major objective of financial reporting?

A)Provide information that is useful to management in making decisions.
B)Provide information that clearly portray nonfinancial transactions.
C)Provide information that is useful to present and potential equity investors, lenders, and other creditors in making decisions..
D)Provide information that excludes claims to the resources.

Question 50

As part of the objective of general-purpose financial reporting, there is an emphasis on "assessing cash flow prospects." Under International Financial Reporting Standards (IFRS) this is interpreted to mean:

A)Cash basis accounting is preferred over accrual based accounting.
B)Information about the financial effects of cash receipts and cash payments is generally considered the best indicator of a company's present and continuing ability to generate favorable cash flows.
C)Over the long run, trends in revenues and expenses are generally more meaningful than trends in cash receipts and disbursements.
D)All of the choices are correct regarding "assessing cash flow prospects" under IFRS.

Question 51

When comparing U.S.GAAP and International Financial Reporting Standards (IFRS)

A)IFRS are considered more comprehensive than U.S.GAAP.
B)IFRS contain more implementation guidance than U.S.GAAP.
C)IFRS are considered more principles-based than U.S.GAAP.
D)All of the choices are correct regarding U.S.GAAP and IFRS.

Question 52

Which of the following is true with regard to the characteristics of the International Accounting Standards Board (IASB)?

A)A unanimous vote by all Board members is needed to issue a new International Financial Reporting Standard (IFRS).
B)The IASB consists of 16 part-time members.
C)Each member of the IASB must come from a different country.
D)IASB members are appointed for 5-year renewable terms.

Question 53

What would be an advantage of having all countries adopt and follow the same accounting standards?

A)Consistency.
B)Comparability.
C)Lower preparation costs.
D)Comparability and lower preparation costs

Question 54

The purpose of the International Accounting Standards Board is to

A)issue enforceable standards which regulate the financial accounting and reporting of multinational corporations.
B)develop a uniform currency in which the financial transactions of companies through-out the world would be measured.
C)develop a single set of high-quality IFRS.
D)arbitrate accounting disputes between auditors and international companies.

Question 55

Which of these statements regarding the IFRS and U.S.GAAP is correct?

A)U.S.GAAP is considered to be "principles-based" and more detailed than IFRS.
B)U.S.GAAP is considered to be "rules-based" and less detailed than IFRS.
C)IFRS is considered to be "principles-based" and less detailed than U.S.GAAP
D)Both U.S.GAAP and IFRS are considered to be "rules-based", but U.S.GAAP tends to be more complex.

Question 56

The two major standard-setting organizations in the world are

A)Financial Accounting Standards Board (FASB) and the International Organization of Securities Commission (IOSCO).
B)Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).
C)The International Accounting Standards Board (IASB) and International Organization of Securities Commission (IOSCO).
D)The International Accounting Standards Board (IASB) and the Standards Advisory Council (SAC).

Question 57

The IASB's standard-setting structure includes all of the following except:

A)IFRS Interpretations Committee
B)IFRS Advisory Council
C)IFRS Comparison Committee
D)Trustees

Question 58

Which of the following organizations is not among the four international standard-setting organizations?

A)IFRS Foundation.
B)IFRS.
C)IFRS.
D)International Organization of Securities Commissions (IOSCO).

Question 59

What is due process in the context of standard setting at the IASB?

A)IASB operates in full view of the public.
B)Public hearings are held on proposed accounting standards.
C)Interested parties can make their views known.
D)All of these answers are correct.

Question 60

Which of the following statements is not an objective of financial reporting?

A)Provide information that is useful in investment and credit decisions.
B)Provide information about enterprise resources, claims to those resources, and changes to them.
C)Provide information on the liquidation value of an enterprise.
D)Provide information that is useful in assessing cash flow prospects.

Question 61

Which of the following is not a major challenge facing the accounting profession?

A)Nonfinancial measurements.
B)Timeliness.
C)Accounting for hard assets.
D)Forward-looking information.

Question 62

Which of the following is not one of the major types of pronouncements issued by the International Accounting Standards Board (IASB)?

A)International financial reporting standard.
B)Memorandum of understanding.
C)Framework for financial reporting.
D)International financial reporting interpretations.

Question 63

Financial statements in the early 2000s provided information related to

A)nonfinancial measurements.
B)forward-looking data.
C)hard assets (inventory and plant assets).
D)None of these answers are correct.

Question 64

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

A)The IASB is a regulatory agency with enforcement powers for its International Financial Reporting Standards (IFRS).
B)The IASB is a public organization, funded by taxpayer dollars from member countries.
C)Is compromised of 16 members.
D)All of the choices are correct regarding the IASB.

Question 65

International financial reporting interpretations (issued by the International Accounting Standards Board)

A)Are considered authoritative and must be followed.
B)Cover newly identified financial reporting issues not specifically addressed by the IASB.
C)Cover issues where unsatisfactory or conflicting interpretations have developed.
D)All of the choices are correct regarding International financial reporting interpretations.

Question 66

What is "expectation gap"?

A)The difference between what the public thinks the accountant is not doing and what the accountant knows they don't do.
B)The difference between what the public thinks the accountant should do and what Congress says the accountant should do.
C)The difference between what the public thinks the accountant should do and what the accountant thinks they can do.
D)The difference between what the accountant should do and what the Courts say the accountant should be doing.

Question 67

Which of the following is an ethical concern of accountants?

A)Earnings manipulation.
B)Conservative accounting.
C)Industry practices.
D)None of the above.

Question 68

Significant financial reporting issues facing global financial reporting and efficient capital allocation include all of the following except:

A)How to provide backward-looking information.
B)How to report nonfinancial measures such as customer satisfaction.
C)How to provide forward-looking information.
D)How to provide real-time financial statement information.

Question 69

The international financial reporting environment includes challenges in financial reporting including all of the following except:

A)Political environment.
B)Expectations gap.
C)Decision-usefulness.
D)Ethics.

Question 70

Which of the following has the highest authoritative support?

A)International Financial Reporting Standards.
B)International Accounting Standards.
C)Interpretations of the IFRIC.
D)Framework for Financial Reporting.

Question 71

What is a possible danger if politics plays too big a role in developing IFRS?

A)Financial reporting standards that are issued that are not truly generally accepted.
B)Individuals may influence the standards.
C)User groups become active.
D)The IASB delegates its authority to elected officials.