Question 1

The European Union has attempted to harmonize accounting principles amongst its member nations by issuing:
A) statutes.
B) standards.
C) bylaws.
D) directives.

Accepted Answer

The European Union issues directives to harmonize accounting principles among member nations. Directives are legal acts that require member states to achieve a particular result without dictating the means of achieving that result.

Question 2

The predecessor to the International Accounting Standards Board (IASB) was:
A) the Federal Accounting Standards Board (FASB).
B) the Canadian Institute of Chartered Accountants (CICA).
C) the European Economic Community (EEC).
D) the International Accounting Standards Committee (IASC).

Accepted Answer

The International Accounting Standards Committee (IASC) was the predecessor to the International Accounting Standards Board (IASB). The IASC was established in 1973 and was replaced by the IASB in 2001.

Question 3

One of the underlying assumptions of the Historical Cost Principle is that a stable unit of measure (currency) should be used for Financial Reporting. Is this always the case? How have some countries attempted to adjust for any limitations associated with the Historical Cost Principle?

Accepted Answer

The answer of One of the underlying assumptions of the...

Question 4

What choice(s) do private enterprises have in their financial reporting in Canada?
A) They have no choice at all; they will need to report under IFRS.
B) They may elect to continue with differential reporting.
C) They may adopt accounting principles that are appropriate to the circumstances.
D) They may elect to report under either IFRS or ASPE.

Accepted Answer

Private enterprises in Canada have the choice to report under either IFRS or ASPE. IFRS is the international standard for financial reporting, and ASPE is the Canadian standard for reporting. Private enterprises may choose which standard is more suitable for their business needs or adopt whichever accounting principles are most appropriate for their circumstances. Additionally, if a private enterprise is a subsidiary of a publicly traded company that reports under IFRS, they may elect to follow the same reporting standards for consistency and ease of comparison.

Question 5

Which of the following is NOT a reason why a Canadian private company would elect to report under IFRS?
A) The company is planning to go public in the near future.
B) The company seeks comparability with public companies of a similar size.
C) It is likely to be less expensive than reporting under ASPE.
D) The company is a subsidiary of a Canadian public company.

Accepted Answer

Reporting under IFRS is generally more complex and potentially more costly than reporting under Accounting Standards for Private Enterprises (ASPE), especially for smaller, private companies due to the increased disclosure requirements and complexity of IFRS standards.

Question 6

What approach did Canada first decide to take with respect to convergence with IFRSs?
A) Harmonization of Canadian GAAP with IFRS.
B) Substituting IFRS's for Canadian GAAP when approved by the IASB.
C) Adopting some but not necessarily all IFRSs by reviewing them on a case by case basis.
D) Reviewing them with all publically accountable entities to see which ones would be acceptable.

Accepted Answer

Canada initially decided to harmonize its Canadian GAAP with IFRS to ensure consistency and comparability in financial reporting.

Question 7

What are Canadian companies whose shares trade on U.S. stock exchanges required to do?
A) Provide two sets of Financial Statements -- one under Canadian GAAP and one under U.S. GAAP.
B) Present reconciliations from Canadian GAAP to U.S. GAAP in the footnotes to their financial statements.
C) File reports using either IFRS or US GAAP.
D) Revalue their assets using the lower-of -cost-and-market principle.

Accepted Answer

Canadian companies trading on U.S. exchanges must file reports using either IFRS or US GAAP, as both are accepted by the SEC.

Question 8

The CICA Handbook -- Accounting is the handbook of Canadian accounting standards. Why do companies in Canada ensure that their financial reporting is consistent with Canadian GAAP?
A) Their bank requires them to do so.
B) Their auditors require them to do so.
C) Reporting under the CICA Handbook -- Accounting is required by public companies' boards of directors.
D) Compliance with the CICA Handbook -- Accounting pronouncements is usually required by incorporation statutes and stock exchanges.

Accepted Answer

Compliance with the CICA Handbook -- Accounting pronouncements is usually required by incorporation statutes and stock exchanges, ensuring that financial reporting is consistent with Canadian GAAP.

Question 9

List 5 factors that can influence a country's accounting standards.

Accepted Answer

The answer of List 5 factors that can influence a...

Question 10

Prior to adoption of IFRS in 2011, Canada's accounting policies most resembled those of which nation?
A) The United Kingdom.
B) The United States.
C) The European Union (EU)
D) Australia

Accepted Answer

Prior to adopting IFRS, Canada's accounting policies were most similar to those of the United States, as both countries followed GAAP (Generally Accepted Accounting Principles).

Question 11

For which of the following types of organizations does the CICA Handbook - Accounting not provide specific accounting standards?
A) Publicly accountable enterprises.
B) Private enterprises.
C) Not-for-profit organizations.
D) Proprietorships.

Accepted Answer

The CICA Handbook - Accounting provides specific accounting standards for publicly accountable enterprises, private enterprises, and not-for-profit organizations, but not specifically for proprietorships.

Question 12

Which of the following accounting standards have been revised by the FASB to be fully consistent with IFRS?
A) Liabilities and equity.
B) Leases.
C) Research and development costs.
D) Consolidations.

Accepted Answer

The answer of Which of the following accounting standards have...

Question 13

X Inc. and Y Inc. are virtually identical companies with identical cost structures and very similar business practices operating in the same lines of business. X Inc. is based in Canada while Y Inc. is based in Japan. The following were the condensed Income Statements for both companies for the year last year before both adopted IFRS. For the sake of simplicity, Y Inc.'s results have been translated into Canadian Dollars.  Given the information provided, what are some possible causes for the differing results of these companies?

Accepted Answer

The answer of X Inc. and Y Inc. are virtually...

Question 14

Many large corporations have operation in numerous countries around the world. As a result, they need to raise debt and equity in order to finance their operations in many different countries. Has the movement towards converging global reporting standards made it easier for corporations to raise capital in many different capital markets around the world?

Accepted Answer

The answer of Many large corporations have operation in numerous...

Question 15

Which enterprises must report under IFRSs in Canada?
A) All corporations, government agencies and private companies.
B) Public companies and private companies whose shareholders' equity is in excess of $500,000,000 at any particular year end.
C) Public companies, private companies and not-for-profit organizations.
D) Publicly accountable enterprises.

Accepted Answer

Publicly accountable enterprises, such as public companies, are required to report under IFRSs in Canada.

Question 16

Briefly discuss the anticipated changes to accounting standards in Canada over the next few years.

Accepted Answer

The answer of Briefly discuss the anticipated changes to accounting...

Question 17

Canada and the U.S. both experimented with price level accounting in the 1970s. This practice was quickly abandoned largely because
A) inflation rates declined after the 1970s.
B) the cost of providing this information was quite high.
C) it was a clear violation of the Historical Cost Principle.
D) it provided disclosure figure which were not verifiable.

Accepted Answer

The cost of providing price level accounting information was high, making it impractical for widespread adoption.

Question 18

Which of the following is a major restructuring objective of the IASB?
A) To ensure compliance to a single set of accounting standards.
B) To progressively phase out divergent accounting practices.
C) To promote a greater understanding of the accounting practices of different nations.
D) To cooperate with various national accounting standard-setters in order to achieve convergence in accounting standards around the world.

Accepted Answer

The IASB aims to work with national accounting standard-setters to harmonize and converge accounting standards globally, reducing differences and improving comparability.

Question 19

Asset revaluations, unlike in Canada, have been acceptable in many countries for accounting purposes. Which of the following adjustments have been allowed?
A) Price level adjusted historical costs.
B) Periodic adjustment of asset valuations to current replacement cost.
C) Immediate write off of purchased goodwill to equity.
D) All of the above.

Accepted Answer

Periodic adjustment of asset valuations to current replacement cost and immediate write off of purchased goodwill to equity are not allowed in Canada, but they have been acceptable in many countries for accounting purposes.

Question 20

Briefly list the two types of legal systems in existence today and discuss how they would affect the accounting standards of a nation.

Accepted Answer

The answer of Briefly list the two types of legal...

Quiz 1: Conceptual and Case Analysis Frameworks for Financial Reporting

The European Union has attempted to harmonize accounting principles amongst its member nations by issuing:

The predecessor to the International Accounting Standards Board (IASB) was:

One of the underlying assumptions of the Historical Cost Principle is that a stable unit of measure (currency) should be used for Financial Reporting. Is this always the case? How have some countries attempted to adjust for any limitations associated with the Historical Cost Principle?

What choice(s) do private enterprises have in their financial reporting in Canada?

Which of the following is NOT a reason why a Canadian private company would elect to report under IFRS?

What approach did Canada first decide to take with respect to convergence with IFRSs?

What are Canadian companies whose shares trade on U.S. stock exchanges required to do?

The CICA Handbook -- Accounting is the handbook of Canadian accounting standards. Why do companies in Canada ensure that their financial reporting is consistent with Canadian GAAP?

List 5 factors that can influence a country's accounting standards.

Prior to adoption of IFRS in 2011, Canada's accounting policies most resembled those of which nation?

For which of the following types of organizations does the CICA Handbook - Accounting not provide specific accounting standards?

Which of the following accounting standards have been revised by the FASB to be fully consistent with IFRS?

Which enterprises must report under IFRSs in Canada?

Briefly discuss the anticipated changes to accounting standards in Canada over the next few years.

Canada and the U.S. both experimented with price level accounting in the 1970s. This practice was quickly abandoned largely because

Which of the following is a major restructuring objective of the IASB?

Asset revaluations, unlike in Canada, have been acceptable in many countries for accounting purposes. Which of the following adjustments have been allowed?

Briefly list the two types of legal systems in existence today and discuss how they would affect the accounting standards of a nation.