Question 1

Under IFRS, "other comprehensive income" does NOT include
A)unrealized holding gains and losses on certain securities.
B)gains and losses on disposal of property, plant and equipment.
C)gains and losses related to certain types of hedges.
D)certain gains and losses related to foreign exchange transactions.

Accepted Answer

Other comprehensive income includes unrealized holding gains and losses on certain securities, gains and losses related to certain types of hedges, and certain gains and losses related to foreign exchange transactions. However, gains and losses on disposal of property, plant and equipment are recognized in the income statement and are not considered a part of other comprehensive income.

Question 2

Representational faithfulness includes
A)completeness, neutrality and comparability.
B)neutrality, completeness, and understandability.
C)relevance, completeness and freedom from material error.
D)neutrality, completeness and freedom from material error.

Accepted Answer

Representational faithfulness refers to the accuracy and reliability of financial information that reflects the economic substance of transactions and events. The information provided must be neutral (not biased towards any particular stakeholder), complete (including all relevant information), and free from material errors (not misleading). Therefore, options A and C are incorrect as they do not include the element of freedom from material error. Option B is incorrect as it includes understandability, which is a desirable qualitative characteristic, but not a requirement for representational faithfulness. Option D correctly includes neutrality, completeness, and freedom from material error.

Question 3

Equitable obligations arise due to
A)statutory requirements.
B)contractual obligations.
C)moral or ethical considerations.
D)union agreements.

Accepted Answer

Equitable obligations are often recognized by courts due to moral or ethical considerations, rather than strictly legal codes or agreements. This means they arise from a sense of fairness or justice, rather than from formal legal requirements or contracts.

Question 4

The costs of providing useful information do NOT include
A)collecting, processing and distributing information.
B)auditing financial statements.
Conceptual Framework Underlying Financial Reporting 2 - 9
C)disclosure to competitors.
D)users' allocation of resources.

Accepted Answer

Disclosure to competitors is not a cost of providing useful information because it does not involve the collection, processing, or distribution of information.

Question 5

You want to improve the qualitative characteristics of your firm's financial statements.Which of the following options would MOST likely improve the timeliness of your company's financial statements?
A)increasing the number of disclosures
B)changing the timing of when revenues are recognized
C)increasing the frequency of statements from annually to quarterly
D)decreasing the useful life of property, plant and equipment from ten years to five

Accepted Answer

Increasing the frequency of statements from annually to quarterly would improve timeliness by providing more up-to-date financial information.

Question 6

Timeliness is increased by
A)quarterly reporting.
B)comparative financial statements.
C)representational faithfulness.
D)annual reporting.

Accepted Answer

The answer of Timeliness is increased by
A)quarterly reporting.
B)comparative financial statements.
C)representational...

Question 7

Which of the following does NOT relate to the concept of relevance?
A)The information must be capable of making a difference in a decision.
B)Both material and immaterial information is important.
C)The information has predictive value.
D)The information has feedback/confirmatory value.

Accepted Answer

The statement "Both material and immaterial information is important" does not directly relate to the concept of relevance. Relevance pertains to whether or not information is important or useful in making a decision or reaching a conclusion. The other statements all relate directly to relevance. A) The information must be capable of making a difference in a decision. B) The information has predictive value. C) The information has feedback/confirmatory value.

Question 8

The common characteristic of both assets and liabilities is that they BOTH
A)provide an economic benefit.
B)result from a past transaction or event.
C)represent a present responsibility.
D)represent contractual or other rights.

Accepted Answer

Both assets and liabilities result from a past transaction or event, as they are recorded in the financial statements based on historical transactions.

Question 9

The overriding criterion by which accounting information can be judged is that of
A)usefulness for decision making.
B)freedom from bias.
C)timeliness.
D)comparability.

Accepted Answer

The usefulness of accounting information in decision making is the ultimate criterion for judging its value. Information that is timely, comparable, and free from bias is important in supplying decision makers with the data they need to make informed decisions. However, the usefulness of accounting information in making sound decisions takes priority over other factors.

Question 10

During a major renovation project of its head office, a worker was seriously injured.While the company believes that it was not at fault, it does include the incident in the notes to its financial statements.This is consistent with the
A)full disclosure principle.
B)periodicity assumption.
C)going concern assumption.
D)economic entity assumption.

Accepted Answer

The full disclosure principle requires that all material and relevant information be included in an entity's financial statements. By including the incident in the notes to the financial statements, the company is adhering to this principle by providing important information to users of the financial statements.

Question 11

Gains are defined as
A)increases in economic resources resulting from an entity's ordinary activities.
B)decreases in economic resources resulting from an entity's ordinary activities.
C)the residual interest remaining after liabilities are deducted from assets.
D)increases in equity resulting from an entity's peripheral or incidental transactions.

Accepted Answer

Gains are defined as increases in equity resulting from an entity's peripheral or incidental transactions, rather than ordinary activities. Choices A and B are incorrect because they refer to increases or decreases in economic resources resulting from ordinary activities, which are actually revenue and expenses. Choice C refers to equity, but does not specifically relate to gains.

Question 12

Financial statements prepared under ASPE include a
A)statement of comprehensive income.
B)statement of cash flows and a statement of changes in shareholders' equity.
C)balance sheet and a statement of retained earnings.
D)statement of retained earnings and a statement of comprehensive income.

Accepted Answer

Financial statements prepared under ASPE include a balance sheet and a statement of retained earnings. However, a statement of comprehensive income and a statement of changes in shareholders' equity are not required, although they may be voluntarily provided.

Question 13

Which of the following elements of financial statements is NOT a component of comprehensive income?
A)Revenues
B)Distributions to owners
C)Losses
D)Expenses

Accepted Answer

Distributions to owners (such as dividends or share repurchases) are not considered a component of comprehensive income. The other options (revenues, losses, and expenses) are all potential components of comprehensive income.

Question 14

Generally, revenue from sales should be recognized at a point when
A)management decides it is appropriate to do so.
B)the product is available for sale.
C)an exchange has taken place and the earnings process is substantially complete.
D)the entire amount receivable has been collected from the customer and there remains
No further warranty liability.

Accepted Answer

Revenue is recognized when an exchange has taken place and the earnings process is substantially complete, meaning the company has fulfilled its obligations to the customer.

Question 15

Sunbury Ltd.operates in both Canada and the United States.The company wants to improve the qualitative characteristics of its financial statements.Which of the following would MOST likely improve the comparability of Sunbury's financial statements?
A)The restatement of its financial statements from Canadian GAAP to US GAAP for its
American investors.
B)The preparation of monthly financial statements.
C)The introduction of a policy that specifies how Sunbury's capital assets should be
Depreciated.
D)The use of U.S.-trained accountants.

Accepted Answer

Restating financial statements from Canadian GAAP to US GAAP would improve comparability for American investors by aligning with the accounting standards they are familiar with.

Question 16

Fundamental qualitative characteristics include
A)relevance and comparability.
B)representational faithfulness and timeliness.
C)relevance and representational faithfulness.
D)verifiability and relevance.

Accepted Answer

The fundamental qualitative characteristics of financial information are relevance and representational faithfulness. Relevance means that information must be capable of making a difference in decisions. Representational faithfulness means that information must faithfully represent what it purports to represent. Comparability, timeliness, and verifiability are all enhancing qualitative characteristics of financial information.

Question 17

Comparability allows any financial statement user to
A)make timely decisions.
B)understand all the information presented.
C)verify all the data provided.
D)identify the real similarities and differences in economic phenomena.

Accepted Answer

Comparability enables users of financial statements to identify the similarities and differences in economic phenomena over time or across companies. This helps them to make informed decisions and understand the financial information presented. Verifying all the data provided or understanding all information presented is not always achievable, but identifying similarities and differences is crucial for financial analysis. Therefore, option D is the best choice.

Question 18

Accounting information is considered to be relevant when it
A)can be depended on to represent the economic conditions and events that it is intended
To represent.
B)is capable of making a difference in a decision.
C)is understandable by reasonably informed users of accounting information.
D)is verifiable and neutral.

Accepted Answer

Accounting information is considered to be relevant when it is capable of making a difference in a decision.

Question 19

Which statement is correct regarding enhancing qualitative characteristics?
A)Full discussion of the information presented is a substitute for comparable information.
B)Numbers that are easily verifiable with a reasonable degree of accuracy are called soft
Numbers.
C)Information must be available before it loses its ability to influence users' decisions.
D)Financial information must be of sufficient quality and clarity that even uninformed
Readers can understand it.

Accepted Answer

Information must be timely to be relevant, meaning it should be available before it loses its ability to influence users' decisions.

Question 20

Under IFRS, equity does NOT include
A)long term leases.
B)common and/or preferred shares.
C)accumulated other comprehensive income.
D)retained earnings.

Accepted Answer

Long term leases are classified as liabilities rather than equity under IFRS.

Quiz 1: Intermediate Accounting Volume 1

Under IFRS, "other comprehensive income" does NOT include

Representational faithfulness includes

Equitable obligations arise due to

The costs of providing useful information do NOT include

You want to improve the qualitative characteristics of your firm's financial statements.Which of the following options would MOST likely improve the timeliness of your company's financial statements?

Timeliness is increased by

Which of the following does NOT relate to the concept of relevance?

The common characteristic of both assets and liabilities is that they BOTH

The overriding criterion by which accounting information can be judged is that of

During a major renovation project of its head office, a worker was seriously injured.While the company believes that it was not at fault, it does include the incident in the notes to its financial statements.This is consistent with the

Gains are defined as

Financial statements prepared under ASPE include a

Which of the following elements of financial statements is NOT a component of comprehensive income?

Generally, revenue from sales should be recognized at a point when

Sunbury Ltd.operates in both Canada and the United States.The company wants to improve the qualitative characteristics of its financial statements.Which of the following would MOST likely improve the comparability of Sunbury's financial statements?

Fundamental qualitative characteristics include

Comparability allows any financial statement user to

Accounting information is considered to be relevant when it

Which statement is correct regarding enhancing qualitative characteristics?

Under IFRS, equity does NOT include