Question 1

The IASB Framework is designed to be a prescriptive document.

Accepted Answer

The IASB Framework is a conceptual framework that provides guidance for developing and revising accounting standards. It is not intended to be a prescriptive document, but rather a tool to assist in the development of accounting standards that are consistent, transparent, and relevant.

Question 2

A fixed asset is defined as an asset which:&#10;A)The firm intends to use for an extended period&#10;B)The firm intends to keep for the foreseeable future&#10;C)Will be sold in more than 12 months after refurbishment&#10;D)Has been owned by the firm for a long time

Accepted Answer

A fixed asset is intended to be used by the firm for an extended period of time, typically more than one accounting period. The other choices are not accurate definitions of a fixed asset.

Question 3

There are two underlying assumptions in the IASB Conceptual Framework,the accruals basis and the going concern assumption.

Accepted Answer

The IASB Conceptual Framework assumes the accruals basis of accounting and the going concern assumption.

Question 4

If information is to be presented faithfully transactions must represent legal form over substance.

Accepted Answer

Faithful representation requires that transactions reflect the economic substance of the events, not merely their legal form, to give users a more accurate understanding of financial positions and performance.

Question 5

Which of the following is NOT a recognised approach to the establishment of an effective accounting theory?&#10;A)regulatory&#10;B)deductive&#10;C)inductive&#10;D)heuristic

Accepted Answer

Heuristic is not a recognized approach for establishing an effective accounting theory. The recognized approaches include regulatory, deductive, and inductive methods. Heuristic methods are more about trial and error or self-discovery processes, which are not formalized approaches in the development of accounting theories.

Question 6

The critical paradigm approach to the formulation of accounting theory centres on social welfare.

Accepted Answer

The critical paradigm approach emphasizes on social welfare as a primary consideration in the formulation of accounting theory. It emphasizes on the use of accounting as a tool for achieving social justice and the distribution of economic benefits. The approach emphasizes that accounting practices and standards should result in economic benefits that are equitably distributed among all members of society.

Question 7

At the end of the year a firm sells an item of inventory for €180.The item was bought for €120 at the start of the year & replacement cost is €150.General inflation has been 5%.What is the real financial capital maintenance adjustment?

A)€0
B)€6
C)€24
D)€30

Accepted Answer

The real financial capital maintenance adjustment is calculated by adjusting the historical cost for inflation to maintain the purchasing power of the firm's capital. The item's historical cost is €120, and with a 5% inflation rate, the adjustment is €120 * 0.05 = €6.

Question 8

IAS 8 addresses changes of accounting policy arising from three sources.

Accepted Answer

IAS 8 does address changes of accounting policy arising from three sources, which are: 
1. Adoption of a new accounting standard or interpretation 
2. Voluntary change of accounting policy 
3. Change in accounting policy due to revision of previous estimates or errors.

Question 9

In which jurisdiction may the requirement for 'a fair presentation' not over-ride compliance with the accounting standard?&#10;A)EU&#10;B)IASB&#10;C)UK&#10;D)USA

Accepted Answer

In the USA, compliance with the accounting standards (Generally Accepted Accounting Principles - GAAP) is paramount. The concept of 'a fair presentation' does not override the strict adherence to these standards, unlike in some other jurisdictions where a fair presentation might take precedence over strict compliance with specific accounting rules.

Question 10

The IASB Framework is a device to:&#10;A)Confer legitimacy on a private sector standard setter&#10;B)Offer a positive explanation of accounting principles&#10;C)Explain,and enforce,the rules laid down by the state&#10;D)Provide a prescriptive solution to problems before they arise

Accepted Answer

The IASB Framework helps confer legitimacy on the IASB as a private sector standard setter by providing a structured approach to developing and applying accounting standards.

Deck 9: Accounting Theory and Conceptual Frameworks