Question 1

IFRS are
A)built on broad principles.
B)rules-based.
C)narrowly defined,detailed standards.
D)seldom different than those issued by the FASB.

Accepted Answer

IFRS (International Financial Reporting Standards) are built on broad principles rather than being narrowly defined, detailed standards, as is the case with rules-based standards. While occasionally there may be differences between IFRS and standards issued by the FASB (Financial Accounting Standards Board), they are generally quite similar.

Question 2

Briefly explain the forces behind the rise of IFRS.

Accepted Answer

The answer of Briefly explain the forces behind the rise...

Question 3

IFRS frequently
A)upon issue are automatically approved for any foreign listed company.
B)permit only one accounting treatment for similar business transactions and events to promote comparability.
C)allow firms less latitude when compared to U.S.GAAP.
D)follow a more generalized overview approach than do U.S.GAAP counterpart standards.

Accepted Answer

IFRS (International Financial Reporting Standards) tend to follow a principles-based approach, which provides a more generalized overview for accounting standards. This approach contrasts with U.S. GAAP (Generally Accepted Accounting Principles), which is more rules-based and provides detailed instructions for specific accounting scenarios.

Question 4

When financial information is measured and reported in a similar manner across different companies in the same industry it is
A)consistent.
B)comparable.
C)neutral.
D)faithfully representeD.

Accepted Answer

The term "comparable" refers to the ability to compare financial information between companies in the same industry that have used similar accounting methods or reporting standards. This allows for a more accurate analysis of financial performance and makes it easier to identify trends or differences between companies. Consistency is also important, but it refers to the use of the same accounting methods and standards within a company over time. Neutral and faithful representation are concepts related to the accuracy and completeness of financial reporting, but they do not specifically relate to comparability between companies.

Question 5

Stock markets are common in many countries and economies.Explain the need for and use of a stock market in an economy.

Accepted Answer

The answer of Stock markets are common in many countries...

Question 6

Financial reporting is arguably one of the most heavily regulated areas of business activity.Provide the main reasons why accounting information is so heavily regulated.In your answer try to address the intended consequences of such regulation.

Accepted Answer

The answer of Financial reporting is arguably one of the...

Question 7

Companies needing to access new and ever larger sources of capital in response to increased international competitiveness face a severe disadvantage if their financial reporting
A)is in accordance with IFRS.
B)is in accordance with U.S.GAAP.
C)is based on a commercial and tax law approach.
D)is based on an economic performance approach.

Accepted Answer

Companies that base their financial reporting on a commercial and tax law approach may face a severe disadvantage in accessing new and larger sources of capital. This is because such an approach might not provide the transparency, comparability, and consistency that investors look for, unlike financial reporting based on IFRS or U.S. GAAP, which are designed to meet international investors' needs.

Question 8

The Financial Accounting Standards Board has responsibility for the establishment of U.S.accounting standards and
A)full statutory power to enforce compliance with GAAP.
B)authority from the SEC to enforce compliance with GAAP.
C)no authority or responsibility to enforce compliance with GAAP.
D)responsibility imposed by AICPA to enforce compliance with GAAP.

Accepted Answer

The Financial Accounting Standards Board (FASB) has the responsibility for establishing U.S. accounting standards, but it does not have the authority or responsibility to enforce compliance with GAAP. Compliance is generally enforced by the Securities and Exchange Commission (SEC) and other regulatory bodies.

Question 9

Differences between IFRS and U.S.GAAP include all of the following except
A)reversal of inventory write-downs.
B)extraordinary items.
C)lease capitalization.
D)research and development costs.

Accepted Answer

Both IFRS and U.S. GAAP have similar guidelines for lease capitalization, especially after the introduction of IFRS 16 and ASC 842, which require most leases to be capitalized on the balance sheet.

Question 10

Some countries' philosophy of financial reporting differs from U.S.GAAP because their financial reports are required to
A)be verifiable.
B)conform to tax and/or commercial law.
C)be reported and measured in a similar manner across companies.
D)use the same accounting methods for similar events period to perioD.

Accepted Answer

Some countries' financial reporting requirements may prioritize conformity with tax and/or commercial law over adherence to accounting principles like U.S. GAAP. This can result in differences in the methods and rules used for financial reporting.

Question 11

When a financial statement contains omissions or misstatements that would alter the judgment of a reasonable person,it violates
A)neutrality.
B)consistency.
C)conservatism.
D)materiality.

Accepted Answer

This is the definition of materiality in accounting. Materiality refers to the importance of an omission or error in the financial statements that would impact the decision-making of a reasonable person. Therefore, if a financial statement contains omissions or misstatements that would alter the judgment of a reasonable person, it violates materiality. Neutrality refers to the unbiased presentation of financial information, consistency refers to comparability of financial information over time, and conservatism refers to the cautious approach taken by accountants when dealing with uncertainty.

Question 12

When a company changes from straight-line to the declining balance method of accounting for depreciation,the financial statements lack
A)comparability.
B)consistency.
C)neutrality.
D)faithful representation.

Accepted Answer

When a company changes from one method of accounting to another, it affects the consistency of financial statements. Consistency is an accounting principle that requires a company to use the same accounting methods and procedures from one accounting period to another. This principle ensures that financial statements are comparable over time and that users can evaluate changes in a company's financial performance using consistent accounting information. As such, when a company changes from straight-line to declining balance method, the financial statements lack consistency, and this can affect their comparability.

Question 13

The Securities and Exchange Act of 1934 required all publicly traded firms to
A)purchase insurance against corporate bankruptcy.
B)register with an authorized stock exchange.
C)provide annual financial statements audited by independent accountants.
D)file balance sheets,income statements,and statements of cash flow with the SEC each year.

Accepted Answer

The Securities and Exchange Act of 1934 requires publicly traded companies to provide annual financial statements audited by independent accountants to ensure transparency and protect investors.

Question 14

Which of the following statements regarding IFRS is incorrect?
A)All companies listed on the London Stock Exchange must use IFRS.
B)The SEC-required Form 20-F must be filed with the SEC by foreign issuers within 30 days.
C)The European Commission must "endorse" IFRS for required use by EU companies.
D)The SEC has expressed concern that transitioning to IFRS might be prohibitively expensive and might lessen U.S.influence over standard setting.

Accepted Answer

The SEC-required Form 20-F must be filed by foreign private issuers with the SEC within four months of the fiscal year-end, not within 30 days. This form is equivalent to the annual report for U.S. companies and includes financial statements prepared according to U.S. GAAP, IFRS, or the issuer's home country GAAP.

Question 15

A tremendous amount of time,money,and effort are spent on the compilation of quarterly and yearly financial reports.Correspondingly,they attract a lot of attention and scrutiny.Explain the role and importance of financial reports in capital markets.

Accepted Answer

The answer of A tremendous amount of time,money,and effort are...

Question 16

Financial reporting philosophies differ across countries.These philosophies evolve from and reflect several factors including all of the following except
A)the language(s)spoken in the country.
B)the specific political institutions within the country.
C)the specific financial institutions within the country.
D)the country's social customs.

Accepted Answer

The language(s) spoken in a country do not typically influence financial reporting philosophies. However, political institutions, financial institutions, and social customs all play a role in shaping a country's financial reporting practices.

Question 17

International accounting rules are currently established by the
A)IASC.
B)IASB.
C)FASB.
D)PCAOB.

Accepted Answer

International accounting rules are currently established by the International Accounting Standards Board (IASB). The International Accounting Standards Committee (IASC) was the predecessor to the IASB and was responsible for the initial development of international accounting standards. The Financial Accounting Standards Board (FASB) is responsible for developing accounting standards in the United States, while the Public Company Accounting Oversight Board (PCAOB) oversees the work of public accounting firms that audit publicly traded companies in the United States.

Question 18

The network of conventions,rules,guidelines,and procedures used by the accounting profession is known as generally accepted
A)auditing standards.
B)accounting procedures.
C)accounting principles.
D)auditing principles.

Accepted Answer

The network of conventions, rules, guidelines, and procedures used by the accounting profession is known as generally accepted accounting principles (GAAP). These principles provide a framework for preparing financial statements in a consistent and comparable manner. They guide accountants in how to record transactions, present information, and make accounting decisions. Option A, auditing standards, refers specifically to the rules and procedures auditors follow when conducting an audit, while option D, auditing principles, is not a commonly used term in accounting. Option B, accounting procedures, is too broad and does not accurately reflect the comprehensive nature of GAAP. Therefore, the most appropriate choice is C) accounting principles.

Quiz 1: The Economic and Institutional Setting for Financial Reporting

IFRS are

Briefly explain the forces behind the rise of IFRS.

IFRS frequently

When financial information is measured and reported in a similar manner across different companies in the same industry it is

Stock markets are common in many countries and economies.Explain the need for and use of a stock market in an economy.

Financial reporting is arguably one of the most heavily regulated areas of business activity.Provide the main reasons why accounting information is so heavily regulated.In your answer try to address the intended consequences of such regulation.

Companies needing to access new and ever larger sources of capital in response to increased international competitiveness face a severe disadvantage if their financial reporting

The Financial Accounting Standards Board has responsibility for the establishment of U.S.accounting standards and

Differences between IFRS and U.S.GAAP include all of the following except

Some countries' philosophy of financial reporting differs from U.S.GAAP because their financial reports are required to

When a financial statement contains omissions or misstatements that would alter the judgment of a reasonable person,it violates

When a company changes from straight-line to the declining balance method of accounting for depreciation,the financial statements lack

The Securities and Exchange Act of 1934 required all publicly traded firms to

Which of the following statements regarding IFRS is incorrect?

A tremendous amount of time,money,and effort are spent on the compilation of quarterly and yearly financial reports.Correspondingly,they attract a lot of attention and scrutiny.Explain the role and importance of financial reports in capital markets.

Financial reporting philosophies differ across countries.These philosophies evolve from and reflect several factors including all of the following except

International accounting rules are currently established by the

The network of conventions,rules,guidelines,and procedures used by the accounting profession is known as generally accepted