Deck 1: Financial Accounting and Accounting Standards

Question 1

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

Answer 1

False

Question 2

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.

Answer 2

False

Question 3

International Accounting Standards are no longer considered applicable because they have been replaced by International Financial Reporting Standards.

Answer 3

False

Question 4

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

Question 5

International Financial Reporting Standards preceded International Accounting Standards.

Question 6

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

Question 7

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

Question 8

The International Accounting Standards Board issues International Financial Reporting Standards.

Question 9

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 10

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

Question 11

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

Question 12

The passage of a new FASB Standards Statement requires the support of five of the seven board members.

Question 13

Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organiza-tion's operations.

Question 14

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

Question 15

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 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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 21

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.

Question 22

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 23

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

Question 24

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 stockholders' equity.

Question 25

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

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

Question 26

Interpretations issued by IFRIC are more authoritative than IASB Standards and Interpretations.

Question 27

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 28

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

Question 29

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

Question 30

Ethical issues in financial accounting are governed by the AICPA.

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

The International Accounting Standards Board (IASB) has 14 members and each member of the IASB must come from a different country.

Question 36

The Norwalk Agreement formalized the FASB's and IASB's commitment to convergence of U.S.GAAP and international standards.

Question 37

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

Question 38

Financial Accounting Concepts set forth fundamental objectives and concepts that are used in developing future standards of financial accounting and reporting.

Question 39

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

Question 40

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 the above.

Question 41

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 42

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 43

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)b and c

Question 44

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 45

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 46

What is a 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 assess the amounts, timing, and uncertainty of perspective cash receipts.
D)Provide information that excludes claims to the resources.

Question 47

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

A)Accounting Standards Committee Foundation (IASCF).
B)Standards Advisory Council (SAC).
C)International Financial Reporting Interpretations Committee (IFRIC).
D)International Organization of Securities Commissions (IOSCO).

Question 48

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 14 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 49

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 14 members from 9 countries.
D)All of the choices are correct regarding the IASB.

Question 50

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

A)FASB 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 the above.

Question 51

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 52

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 53

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 the choices are correct.

Question 54

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 55

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 56

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 the above.

Question 57

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 58

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 59

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 60

Users of financial reports include all of the following except:

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

Question 61

Which organization is responsible for issuing Emerging Issues Task Force Statements?

A)FASB
B)CAP
C)APB
D)SEC

Question 62

The Financial Accounting Foundation

A)oversees the operations of the FASB.
B)oversees the operations of the AICPA.
C)provides information to interested parties on financial reporting issues.
D)works with the Financial Accounting Standards Advisory Council to provide informa-tion to interested parties on financial reporting issues.

Question 63

The Financial Accounting Standards Board

A)has issued a series of pronouncements entitled Statements on Auditing Standards.
B)was the forerunner of the current Accounting Principles Board.
C)is the arm of the Securities and Exchange Commission responsible for setting financial accounting standards.
D)is appointed by the Financial Accounting Foundation.

Question 64

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 65

Companies that are listed on a stock exchange are required to submit their financial statements to the

A)AICPA.
B)APB
C)FASB.
D)SEC.

Question 66

What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?

A)The SEC requires all companies listed on an exchange to submit their financial statements to the SEC.
B)The SEC coordinates with the AICPA in establishing accounting standards.
C)The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction.
D)The SEC reviews financial statements for compliance.

Question 67

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 68

The passage of a new FASB Standards Statement requires the support of

A)all Board members.
B)three Board members.
C)four Board members.
D)five Board members.

Question 69

The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the

A)FASB.
B)AICPA.
C)SEC.
D)APB.

Question 70

Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight?

A)Smaller membership.
B)FASB board members are well-paid.
C)FASB board members must be CPAs.
D)Due process.

Question 71

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 72

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 73

The role of the Securities and Exchange Commission in the formulation of accounting principles can be best described as

A)consistently primary.
B)consistently secondary.
C)sometimes primary and sometimes secondary.
D)non-existent.

Question 74

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 75

The Norwalk Agreement

A)Sets forth fundamental objectives and concepts used in developing future standards of financial reporting.
B)Formalized the FASB's and IASB's commitment to convergence of U.S.GAAP and international standards.
C)Facilitates cross-border cooperation, reduces global systemic risk, protects investors, and ensures fair and efficient markets.
D)All of the choices are correct regarding the Norwalk Agreement.

Question 76

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.

Question 77

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 78

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

A)Financial reporting standards 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.

Question 79

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 is doing and what Congress says the accountant is doing.
C)The difference between what the public thinks the accountant is doing and what the accountant thinks they can do.
D)The difference between what the accountant is doing and what the Courts say the accountant should be doing.

Question 80

What is the purpose of Emerging Issues Task Force?

A)Provide interpretation of existing standards.
B)Provide a consensus on how to account for new and unusual financial transactions.
C)Provide interpretive guidance.
D)Provide timely guidance on select issues.