Question 1

Canadian corporations are prohibited from using U.S.GAAP.

Accepted Answer

Canadian corporations are allowed to use U.S.GAAP as an alternative to Canadian GAAP (IFRS). However, they must disclose the differences between the two sets of standards in their financial statements.

Question 2

Due to the excellent work of the ACSB,there are very few choices among alternative accounting policies today.

Accepted Answer

While the Accounting Standards Codification was developed to promote consistency in accounting policies, there are still various alternatives available based on specific company circumstances and interpretations of the standards.

Question 3

A wholly-owned subsidiary of a multinational corporation is essentially a private corporation.

Accepted Answer

A wholly-owned subsidiary is a company that is completely owned by another company. While it may be a subsidiary of a larger corporation, it is a separate legal entity and is considered a private corporation.

Question 4

In Canada,almost all equity financing for both public and private companies is done through private placements.

Accepted Answer

In Canada, equity financing for both public and private companies can be done through various methods, including public offerings, private placements, and other mechanisms, not almost all through private placements.

Question 5

The accounting standards for private enterprises (ASPE) are essentially a scaled-down version of the CICA handbook,which is available to all small and medium sized enterprises with no fiduciary responsibility.

Accepted Answer

The statement is correct. ASPE is a simplified version of the CICA handbook and is suitable for small and medium-sized enterprises without fiduciary responsibility.

Question 6

Mutual fund companies,which may be privately held,are deemed to have a fiduciary responsibility and must therefore comply with IFRS.

Accepted Answer

Mutual fund companies are considered to have a fiduciary responsibility to their clients and are required to comply with International Financial Reporting Standards (IFRS) to ensure accurate and transparent reporting of their financial statements.

Question 7

Private companies in Canada may choose between IFRS or ASPE.

Accepted Answer

Private companies in Canada have the option to choose between International Financial Reporting Standards (IFRS) or Accounting Standards for Private Enterprises (ASPE).

Question 8

A company's functional currency is the currency in which it conducts most of its business.

Accepted Answer

The functional currency of a company is the currency that is used in the primary economic environment in which the company operates and generates cash flows. It is the currency in which the company conducts most of its business.

Question 9

The disclosed basis of accounting (DBA) refers to the use of Non-GAAP accounting policies by private companies.

Accepted Answer

The disclosed basis of accounting (DBA) refers to the use of Non-GAAP accounting policies by private companies.

Question 10

In North America,the principal stakeholder to whom general-purpose financial statements are geared is the shareholder.

Accepted Answer

In North America, the principal stakeholder to whom general-purpose financial statements are geared is indeed the shareholder.

Question 11

A company's functional currency is always the currency in which the financial statements are presented.

Accepted Answer

A company's functional currency is the currency of the primary economic environment in which it operates, which may differ from the currency in which its financial statements are presented.

Question 12

The influence of tax rules when selecting appropriate accounting treatment for a transaction is particularly strong with public companies.

Accepted Answer

Public companies prioritize financial reporting standards and investor expectations over tax rules when selecting appropriate accounting treatments, as their primary goal is to provide transparent and comparable financial information to stakeholders. Tax considerations might influence decision-making but are not the primary driver.

Question 13

External users of a company's financial statements may have conflicting objectives.

Accepted Answer

External users of a company's financial statements include investors, creditors, analysts, regulators, and customers. These users may have different objectives and interests, such as profitability, liquidity, solvency, efficiency, sustainability, compliance, or reputation. Therefore, the information provided in financial statements may be relevant or useful to some users but not to others, and may even be interpreted in different ways or with different priorities. For example, investors may focus on the return on investment and share price growth, while creditors may focus on the ability of the company to repay its debts on time and with interest, and regulators may focus on the compliance with legal and ethical standards.

Question 14

Canada has adapted its own pre-existing standards for public companies to IFRS,while the U.S has adopted IFRS completely.

Accepted Answer

The United States has not adopted IFRS completely and still uses Generally Accepted Accounting Principles (GAAP) for domestic public companies. However, some U.S. companies that operate internationally may use IFRS as well. Canada has adapted its pre-existing standards to be in line with IFRS for public companies.

Question 15

Different stakeholders have different reporting requirements with respect to general-purpose financial statements.A lender will be more interested in a company's cash flows while an investor will likely be more interested in a company's earnings.

Accepted Answer

Different stakeholders have varying needs and interests in financial statements. Lenders are concerned about a company's ability to repay loans and may focus on cash flow information. Investors, on the other hand, are more interested in a company's profitability and may focus on earnings or other measures of financial performance.

Question 16

The Canadian Business Corporations Act mandates that all incorporated companies in Canada follow IFRS.

Accepted Answer

The Canadian Business Corporations Act does not mandate that all incorporated companies in Canada follow IFRS (International Financial Reporting Standards). Instead, it is the Canadian securities regulators that require publicly accountable enterprises to use IFRS. Private companies have the option to use either IFRS or Accounting Standards for Private Enterprises (ASPE).

Question 17

Privately held,publicly accountable companies with a fiduciary responsibility must comply with IFRS.

Accepted Answer

Privately held companies that are publicly accountable and have a fiduciary responsibility must follow IFRS (International Financial Reporting Standards). This requirement may vary depending on the country, but in general, companies with these characteristics need to comply with IFRS to ensure consistency and transparency in financial reporting.

Question 18

Canadian companies must always present their financial results in Canadian dollars.

Accepted Answer

Canadian companies can present their financial results in other currencies if it makes more sense for their business operations, especially if they operate primarily in a different country or their financial performance is more accurately represented in another currency. The choice of presentation currency is guided by the relevant accounting standards such as IFRS or Canadian GAAP, which allow for flexibility based on the company's primary economic environment.

Question 19

The main purpose of financial accounting is to communicate useful financial information to decision-makers both inside and outside of the business organization.

Accepted Answer

Financial accounting is the process of recording, classifying, summarizing, and communicating financial information to various stakeholders, such as investors, creditors, regulators, and managers, to help them make informed decisions about the business. Therefore, the main purpose of financial accounting is to communicate useful financial information to decision-makers both inside and outside of the business organization.

Question 20

IFRS standards may be modified to allow for a disclosed basis of accounting (DBA).

Accepted Answer

IFRS standards are global accounting standards and cannot be modified for individual reporting purposes. Entities must fully comply with IFRS as issued by the IASB without modifications for a disclosed basis of accounting.

Quiz 1: The Framework for Financial Reporting

Canadian corporations are prohibited from using U.S.GAAP.

Due to the excellent work of the ACSB,there are very few choices among alternative accounting policies today.

A wholly-owned subsidiary of a multinational corporation is essentially a private corporation.

In Canada,almost all equity financing for both public and private companies is done through private placements.

The accounting standards for private enterprises (ASPE) are essentially a scaled-down version of the CICA handbook,which is available to all small and medium sized enterprises with no fiduciary responsibility.

Mutual fund companies,which may be privately held,are deemed to have a fiduciary responsibility and must therefore comply with IFRS.

Private companies in Canada may choose between IFRS or ASPE.

A company's functional currency is the currency in which it conducts most of its business.

The disclosed basis of accounting (DBA) refers to the use of Non-GAAP accounting policies by private companies.

In North America,the principal stakeholder to whom general-purpose financial statements are geared is the shareholder.

A company's functional currency is always the currency in which the financial statements are presented.

The influence of tax rules when selecting appropriate accounting treatment for a transaction is particularly strong with public companies.

External users of a company's financial statements may have conflicting objectives.

Canada has adapted its own pre-existing standards for public companies to IFRS,while the U.S has adopted IFRS completely.

Different stakeholders have different reporting requirements with respect to general-purpose financial statements.A lender will be more interested in a company's cash flows while an investor will likely be more interested in a company's earnings.

The Canadian Business Corporations Act mandates that all incorporated companies in Canada follow IFRS.

Privately held,publicly accountable companies with a fiduciary responsibility must comply with IFRS.

Canadian companies must always present their financial results in Canadian dollars.

The main purpose of financial accounting is to communicate useful financial information to decision-makers both inside and outside of the business organization.

IFRS standards may be modified to allow for a disclosed basis of accounting (DBA).