Question 1

The AICPA Special Committee on Financial Reporting developed a comprehensive model of business reporting in an attempt to provide a foundation for future improvement in business reporting.The five statements below relate to the five categories of information outlined in the committee's work.
 a. $\underline{\quad\quad}$and $\underline{\quad\quad}$including(1) financial statements and related disclosures and.(2) high-level operating data and performance measurements.

b.$\underline{\quad\quad}$of the financial and nonfinancial data, including(1) reasons for changes in the data and (2) the identity and past effect of key trends.

c. $\underline{\quad\quad}$including(1) assessment of opporturities and risks, (2) management's plans, and (3) comparis on of actual performance to previously disclosed opportunities, risks, and plans.

d. $\underline{\quad\quad}$about $\underline{\quad\quad}$and$\underline{\quad\quad}$ including(1) directors, management, compensation, and major shareholders and (2) transactions and relationships among related parties.

e. $\underline{\quad\quad}$about the$\underline{\quad\quad}$ including (1) broad objectives and strategies, (2) scope and description of the company's business and properties, and (3) the impact of incustry structure. Required:
Fill in the blanks in each statement above with the appropriate information category.

Accepted Answer

The answer of The AICPA Special Committee on Financial Reporting...

Question 2

The task of developing the conceptual framework was so enormous that the FASB had to divide it into several projects.
Required:
Identify each of the projects by name and provide a brief description of their results.

Accepted Answer

The answer of The task of developing the conceptual framework...

Question 3

Below is a list of the qualitative characteristics identified by GAAP.Following the list is a series of descriptive phrases.
   Required:
Match each characteristic with the appropriate phrase.

Accepted Answer

The answer of Below is a list of the qualitative...

Question 4

Presented below are five inappropriate accounting procedures that are being used by the Devin Corporation.
 a. On the yerr-end balance sheet, DevinCorporation reported its inventory at market value, which was greater than cost. As a result of this proce chue, a gain was recogrized on the company's income statement.

b. Mrs. Devin, the president of the company, purchased an aut omobile for her son using the company's money. The company's accountant recorded the expenditure as salaries expense.

Devin Carporation reported income from operations of $ \$ 5,000,000 $ for the current year. During the year, Devin settled and paid a $ \$ 5,000,000 $ class action lawsut against the company resulting from damages incurred from the sale of defective products. The settlementwas reported as a miscellane ous expense with no footnotes provided.

d. Devin Corporation is going to issue additional common stock next year. In order to improve its income, the company switched from the LIFO inventory cost flow method to FIFO. The company did not disclose the accounting change. Comparative finencial statements were prepared.

e.The company made $ \$ 3,000,000 $ of expenditures to expand a building that originally cost $ \$ 5,000,000 $. The expenditures are expected to benefit operations over the building s remaining useful life of ten years. The expencitureswere expensed as maintenance. Required:
For each of the above items, list the accounting assumption(s), convention(s), or principle(s)that is (are)being violated.

Accepted Answer

The answer of Presented below are five inappropriate accounting procedures...

Question 5

The IASB and FASB boards have agreed that the objective of general purpose financial reporting is to provide

Accepted Answer

The objective of general purpose financial reporting is to provide financial information about a company that is useful to external users in making decisions in their capacity as capital providers. This includes investors, creditors, and other stakeholders who provide capital to the company. The financial information should be useful in assessing the company's ability to generate cash flows and in evaluating the company's financial position, performance, and prospects.

Question 6

Below is a list of accounting assumptions, conventions, and principles.Following the list is a series of descriptive statements.
   Required:
Match each item in the list with its descriptive statement by placing the appropriate letter in the space provided.

Accepted Answer

The answer of Below is a list of accounting assumptions,...

Question 7

A list of statements follows:
 a.$\underline{\quad\quad}$on$\underline{\quad\quad}$ provides a measure of overall company performance.
b.$\underline{\quad\quad}$is the uncertainty or umpredictability of the future results of a company.
c.$\underline{\quad\quad}$is the ability of a company to take effective actions to change the amounts and timing of cash flows.
d.$\underline{\quad\quad}$ is the term used to describe how quickly a company can convert its assetsinto cash to pay a liability.
e.$\underline{\quad\quad}$refers to the ability of a company to maint ain a given physical level of operations
 Required:
Fill in the words necessary to complete the statements.

Accepted Answer

The answer of A list of statements follows:
 a.$\underline{\quad\quad}$on$\underline{\quad\quad}$ provides...

Question 8

One of the differences between the IASB/FASB joint conceptual framework and the FASB conceptual framework is that while the FASB identifies relevance and reliability as the primary decision-specific qualities, the tentative joint framework identifies the fundamental qualitative characteristics to be

Accepted Answer

The joint conceptual framework identifies relevance and faithful representation as the fundamental qualitative characteristics, which are similar to the FASB's primary decision-specific qualities of relevance and reliability. However, completeness is not identified as a fundamental qualitative characteristic in the joint framework.

Question 9

A list of statements follows:
 a. GAAP identifies the $\underline{\quad\quad}$of financial reporting
b. Financial repating should, above all, provide information that is $\underline{\quad\quad}$to external decision makers.
c. A company's financial statements and other me ans of financial reporting should include explanations and interpret ations by its management to help external users under stand the financial infomation provided. This represents management's $\underline{\quad\quad}$to outsiders.
 Required:
Fill in the words necessary to complete the statements.

Accepted Answer

The answer of A list of statements follows:
 a. GAAP...

Question 10

The IASB and FASB joint boards have identified the primary user groups of financial information as all of the following except

Accepted Answer

The IASB and FASB joint boards have identified the primary user groups of financial information as equity investors, lenders, and other creditors (capital providers). Labor groups are not considered one of the primary user groups of financial information.

Question 11

Similar to the constraints in the FASB's qualitative characteristics, the joint IASB/FASB boards have identified two constraints including

Accepted Answer

The joint IASB/FASB boards have identified two constraints including benefits that justify the costs and materiality. Consistency is also an important qualitative characteristic, but it is not listed as a constraint. Objectivity is another important qualitative characteristic, but it is not listed as a constraint either.

Question 12

The joint IASB and FASB boards identified several "enhancing" characteristic of financial information including

Accepted Answer

The enhancing characteristics of financial information as identified by the joint efforts of the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) include comparability, verifiability, timeliness, and understandability. These characteristics are meant to improve the quality of financial information, making it more useful for decision-making purposes.

Question 13

At lunch recently, two accountants were discussing the merits of the FASB's conceptual framework project, which resulted in the publication of seven Statements of Financial Accounting Concepts and required more than ten years of effort.One accountant thought the effort was a waste of resources, since accounting was unlike physics, chemistry, and biology, where natural laws apply.The other accountant thought the effort was very valuable.He stated that "accounting, like any other discipline, benefits from having a coherent theory."
Required:
Write a brief essay that discusses the advantages that are derived from the existence of a conceptual framework for financial accounting and reporting.

Accepted Answer

The answer of At lunch recently, two accountants were discussing...

Question 14

The FASB identified several objectives of financial reporting, which are listed below.Following the list is a series of descriptive statements.
   Required:
Match each objective with the appropriate statement by placing the appropriate letter in the space provided.

Accepted Answer

The answer of The FASB identified several objectives of financial...

Question 15

A list of statements follows:
 a.GAAP states that the two primary qualitative characteristics that make accounting information useful for decision-making purposes are$\underline{\quad\quad}$ and$\underline{\quad\quad}$

b.Corporations prepre quarterly financial statements in order to help achieve$\underline{\quad\quad}$ an ingrecient of the primary quality of relevance.

c.Expensing the purchase of waste paper baskets that have a three-ye es estimated useful life at the clate of acquisition is a permissible procedure accordingto the $\underline{\quad\quad}$constraint.
d. The three components of reliability are$\underline{\quad\quad}$,$\underline{\quad\quad}$ and$\underline{\quad\quad}$
e.$\underline{\quad\quad}$is the overall qualitative characteristic to be used in judging the quality of accountine information
 Required:
Fill in the words necessary to complete the statements.

Accepted Answer

The answer of A list of statements follows:
 a.GAAP states...

Question 16

Following the list below is a series of descriptions of inappropriate accounting procedures.
   Required:
Indicate which item (or items)on the list was (were)violated in each description by placing the appropriate letter(s)in the space provided.

Accepted Answer

The answer of Following the list below is a series...

Question 17

The joint IASB/FASB qualitative characteristics Exposure Draft identifies a logical order in which to evaluate the qualities.That order (first, second, third)is

Accepted Answer

The joint IASB/FASB qualitative characteristics Exposure Draft identifies the order in which to evaluate the qualities as relevance being evaluated first, followed by faithful representation, and then enhancing characteristics. This is done to ensure that the information presented is both relevant to the decision-making process and accurately represents the underlying events and circumstances. Enhancing characteristics are evaluated last to ensure that they do not override relevance and faithful representation. Therefore, option C is the correct answer.

Question 18

The IASB and FASB joint boards feel that financial reporting should

Accepted Answer

The IASB and FASB joint boards believe that financial reporting should be general purpose, useful in assessing a company's future cash flows, and provide information on an accrual basis.

Question 19

Certain elements of the financial statements are listed below, followed by a series of descriptive statements.
   Required:
Match each element with the appropriate statement by placing the appropriate letter in the space provided.

Accepted Answer

The answer of Certain elements of the financial statements are...

Question 20

Part of the hierarchy of qualitative characteristics is presented below.
Required:
Provide the qualitative characteristic for each lettered box.
  a.$\underline{\quad\quad\quad\quad\quad\quad\quad\quad}$
b.$\underline{\quad\quad\quad\quad\quad\quad\quad\quad}$
c.$\underline{\quad\quad\quad\quad\quad\quad\quad\quad}$
d.$\underline{\quad\quad\quad\quad\quad\quad\quad\quad}$
e.$\underline{\quad\quad\quad\quad\quad\quad\quad\quad}$
f.$\underline{\quad\quad\quad\quad\quad\quad\quad\quad}$

Accepted Answer

The answer of Part of the hierarchy of qualitative characteristics...

Quiz 2: Financial Reporting: Its Conceptual Framework

The task of developing the conceptual framework was so enormous that the FASB had to divide it into several projects. Required: Identify each of the projects by name and provide a brief description of their results.

Below is a list of the qualitative characteristics identified by GAAP.Following the list is a series of descriptive phrases. Required: Match each characteristic with the appropriate phrase.

The IASB and FASB boards have agreed that the objective of general purpose financial reporting is to provide

Below is a list of accounting assumptions, conventions, and principles.Following the list is a series of descriptive statements. Required: Match each item in the list with its descriptive statement by placing the appropriate letter in the space provided.

One of the differences between the IASB/FASB joint conceptual framework and the FASB conceptual framework is that while the FASB identifies relevance and reliability as the primary decision-specific qualities, the tentative joint framework identifies the fundamental qualitative characteristics to be

The IASB and FASB joint boards have identified the primary user groups of financial information as all of the following except

Similar to the constraints in the FASB's qualitative characteristics, the joint IASB/FASB boards have identified two constraints including

The joint IASB and FASB boards identified several "enhancing" characteristic of financial information including

The FASB identified several objectives of financial reporting, which are listed below.Following the list is a series of descriptive statements. Required: Match each objective with the appropriate statement by placing the appropriate letter in the space provided.

Following the list below is a series of descriptions of inappropriate accounting procedures. Required: Indicate which item (or items)on the list was (were)violated in each description by placing the appropriate letter(s)in the space provided.

The joint IASB/FASB qualitative characteristics Exposure Draft identifies a logical order in which to evaluate the qualities.That order (first, second, third) is

The IASB and FASB joint boards feel that financial reporting should

Certain elements of the financial statements are listed below, followed by a series of descriptive statements. Required: Match each element with the appropriate statement by placing the appropriate letter in the space provided.