Deck 2: A Conceptual Framework: Scope, reporting Entity and the Objective of Financial Report

Question 1

Which of these are identified by SAC2 as major categories of users of general-purpose financial reports?

A) Resource providers
B) Parties performing an oversight function
C) Recipients of goods and services
D) All of the above

Answer 1

D

Question 2

Under the FASB Statement of Financial Accounting Concepts No.1 the scope of general purpose financial reporting includes all of the following except:

A) management forecasts included in the financial reports
B) cash budgets prepared by management
C) voluntary information in the notes to the financial statements
D) None of the above is excluded from the scope of general purpose financial reports

Answer 2

B

Question 3

SAC1 defines an entity which has users who are dependent on general purpose financial reports as a/an:

A) accounting entity
B) reporting entity
C) company entity
D) legal entity

Answer 3

B

Question 4

The correct order for the seven levels of the accounting standard-setting part of the conceptual framework is:

A) standard-setting policy, display, border of discipline, subject, objective, fundamentals, operational
B) fundamentals, border of discipline, operational, subject, objective, display, standard-setting policy
C) border of discipline, subject, objective, fundamentals, operational, display, standard-setting policy
D) subject, objective, fundamentals, border of discipline, operational, display, standard-setting policy

Question 5

The approach taken in the Australian conceptual framework is:

A) hypothetical
B) notional
C) descriptive
D) prescriptive

Question 6

Which of these is the least likely to be able to use their influence to obtain special purpose reports to meet their needs for financial information?

A) Governments
B) Institutional investors
C) Small shareholders
D) Major lenders

Question 7

Which statement is incorrect?

A) APB statement No. 4. 'Basic-Concepts and Accounting Principles Underlying Financial Statements of Business Enterprises' was the US profession's first conceptual framework
B) The trend in accounting over many years has been to reduce disclosure in published reports
C) The double-entry bookkeeping system was developed in Italy during the 13^th and 14^th centuries
D) In earlier times many present-day transactions were not contemplated by accountants

Question 8

A major beneficiary from the development of a conceptual framework is expected to be:

A) governments
B) preparers of financial reports
C) accounting standard setters
D) managers

Question 9

The statement concerning general-purpose financial reports that is correct is:

A) Potential users of the reports are in a strong bargaining position to demand information from the entity to meet their needs
B) No particular group of users of the reports is provided with ideal information for their needs
C) The objective of the reports is to meet the needs of both external and internal users
D) The reports specifically attempt to meet all the information needs of shareholders

Question 10

The first and second levels of the conceptual framework are concerned with:

A) the qualitative characteristics of financial reporting
B) the elements of financial reporting
C) the objective of financial reporting
D) the scope of financial reporting

Question 11

The elements of financial statements,as outlined in the conceptual framework,are:

A) assets, liabilities, equity, income, expenses
B) balance sheet, income statement, cash flow statement
C) materiality, comparability, relevance, reliability
D) historical cost, current cost, net market value, constant purchasing power

Question 12

Which factor(s)is/are identified in SAC1 to assist in determining whether an entity has users dependent on general purpose financial reports?

A) Type of accounting system
B) Classes of issued shares
C) Separation of management and ownership
D) All of the above

Question 13

Which of these is not one of the major potential benefits of a conceptual framework?

A) More economical development of standards
B) Increased international compatibility of standards
C) Savings in auditing costs
D) None of the above, i.e., all are major potential benefits of a conceptual framework

Question 14

Which of these is a constraint on financial reporting rather than a qualitative characteristic?

A) Relevance
B) Comparability
C) Timeliness
D) Reliability

Question 15

Management must ensure that the information contained in financial statements is presented in such a way that the statements can be understood only by:

A) the financially literate
B) accounting professionals
C) customers and employees
D) None of the above. Everyone should be able to understand financial statements

Question 16

The first Australian study on the objective of financial reporting was by:

A) Kenley and Staubus
B) Sprouse and Moonitz
C) Chambers
D) Paton and Littleton

Question 17

When deciding whether an entity is a reporting entity reference should be made to:

A) relevant legislation rather than SAC1
B) SAC1 rather than relevant legislation
C) ASX listing rules rather than Australian Accounting Standards
D) Australian Accounting Standards rather than ASX listing rules

Question 18

Under APES1 entities that will always be reporting entities and are required to prepare general purpose financial reports include:

A) family trusts
B) local government
C) stock exchange listed companies
D) both B and C

Question 19

SAC2 defines the objective of general purpose financial reporting as:

A) to provide information to users that is useful for making and evaluating decisions about the allocation of scarce resources
B) to decide whether the reporting entity is achieving its objectives
C) to give a true and fair view of the financial position and performance of the entity
D) all of the above

Question 20

In establishing external reporting requirements,the Corporations Act distinguishes between:

A) large and small proprietary companies
B) service and non-service entities
C) legal and non-legal entities
D) reporting and non-reporting entities

Question 21

Explain and discuss why,when there was already a large number of accounting standards on issue,accountants decided that they needed a conceptual framework.

Question 22

'General purpose financial reports should meet the information needs of users with only a limited knowledge and understanding of financial matters'.Discuss

Question 23

Under SAC2,parties performing a review or oversight functions for general-purpose financial reports would include all of the following,except:

A) ACCC
B) Lenders
C) Stock Exchange
D) ASIC

Question 24

Describe the structure of the Australian conceptual framework.In your answer explain how the building blocks fit together at each level.

Question 25

Distinguish between general purpose and special purpose financial reports.In your answer give examples of each type of report.

Question 26

From 1 January 2005 the Australian conceptual framework consists of:

A) SAC 1-2 and the IASB conceptual framework
B) SAC 1-4 and the IASB conceptual framework
C) the IASB conceptual framework
D) none of the above

Question 27

Which statement is true?

A) The provision of information for control is regarded as a more appropriate objective for external reporting than the decision-usefulness objective
B) Decision-usefulness as the objective for financial reporting is a relatively recent innovation
C) The historical cost measurement basis is specifically designed to meet the decision-usefulness objective
D) None of the statements is true, i.e., all are untrue

Question 28

Which of these statements is correct?

A) The principle qualitative characteristics in the Framework are substantially different to those in the old SAC3
B) Possible measurement bases in the Framework do not include current cost
C) The operational level of the Framework is concerned with the recognition and measurement of the elements of financial statements
D) All of the statements are correct