Question 1

The concept of "improve and adopt" refers to:

Accepted Answer

"Improve and adopt" is a phrase commonly used in the context of the convergence of IFRS with GAAP. It refers to the process of improving existing financial reporting standards and adopting a common set of high-quality global standards.

Question 2

In the U.S., the word "reserve" always means:

Accepted Answer

In the US, the term "reserve" generally refers to a provision set aside for a specific purpose or contingency, such as bad debt reserve or reserve for future expenses. It does not refer to impairment, market value adjustment, or depreciation write-down.

Question 3

The difference between provisions and reserves can best be characterized as:

Accepted Answer

Provisions are recognized as liabilities on the balance sheet by charging against profits, while reserves are created from profits and are part of shareholders' equity. Provisions are set aside for specific liabilities or potential losses, while reserves are set aside for future contingencies or investments. Therefore, A is the best choice.

Question 4

The Norwalk agreement refers to:

Accepted Answer

The Norwalk agreement, signed in 2002, refers to the commitment of FASB (Financial Accounting Standards Board) and IASB (International Accounting Standards Board) to converge U.S. GAAP (Generally Accepted Accounting Principles) and international accounting standards (IAS) to create a common set of high-quality global accounting standards. The agreement aims to improve the comparability and consistency of financial reporting worldwide.

Question 5

The FASB and IASB joint conceptual framework project has as its objective:

Accepted Answer

The objective of the FASB and IASB joint conceptual framework project is to establish a sound foundation for future accounting standards. It is not focused on developing a single set of standards or replacing existing conceptual frameworks, although those may be outcomes of the project. The project also does not specifically aim to replace a rules-based system with a principles-based approach, although that is a general trend in the development of accounting standards.

Question 6

One concern with U.S.GAAP identified by Schipper is:

Accepted Answer

Schipper identified that one concern with U.S.GAAP is that the principles can become rules-based exercises during implementation, meaning that the focus shifts from the underlying principles to rigidly following specific rules.

Question 7

Lease standards in the U.S.can be manipulated to achieve the desired goal of:

Accepted Answer

All of the above. Lease standards in the U.S. can be manipulated to achieve the desired goal of capitalizing lease payments at their present values to record an asset instead of an expense, capitalizing lease payments at their present values to record an expense instead of an asset, or emphasizing form over substance.

Question 8

One problem of a more principles-based system that was pointed out in an SEC study is that they:

Accepted Answer

The SEC study pointed out that a more principles-based system may present enforcement problems, which suggests that it may not be as effective for ensuring compliance as a rules-based system. While principles-based systems do not rely on bright-line tests, the study did not suggest that this was a particular issue with such systems. Therefore, options A and C can be ruled out as incorrect choices. Since option B accurately reflects the finding of the SEC study, it is the best answer. Option D is incorrect because not all of the choices listed are accurate.

Question 9

The IASB Framework for the Preparation and Presentation of Financial Statements:

Accepted Answer

The IASB Framework serves as a guide to resolving accounting issues not directly addressed in a standard, helping ensure consistency and coherence in financial reporting.

Question 10

The reason some people are concerned about the possibility for earnings management under IFRS is:

Accepted Answer

The answer of The reason some people are concerned about...

Question 11

A common set of accounting standards on an international level can help to achieve each of the following except for:

Accepted Answer

A common set of accounting standards primarily focuses on financial reporting (IFRS) rather than enforcement, which is typically the responsibility of regulatory bodies.

Question 12

Given that IFRS is not currently required in the U.S., foreign companies that list their stock on the New York Stock Exchange must:

Accepted Answer

Foreign companies that list their stock on the New York Stock Exchange must follow either of the two options - reconcile their financial statements to U.S.GAAP or use IFRS in their financial statements. This is in accordance with the Securities and Exchange Commission (SEC) rules.

Question 13

The relatively more principles-based IFRS standards requires each of the following except for:

Accepted Answer

The IFRS standards require professional judgment in applying the true and fair view override, substance over form concept, and present fairly concept. They also require professional judgment at both the transaction and financial statement levels, but they do not require a specific level of principles or rules-based information. Choice D is the exception as it is not one of the principles requiring professional judgment in the IFRS standards.

Question 14

The rules under IFRS for property, plant, and equipment differ from U.S.GAAP because:

Accepted Answer

The rules under IFRS allow for the revaluation of property, plant, and equipment, which is not allowed under U.S.GAAP.

Question 15

The FASB and IASB joint conceptual framework differs from the U.S.conceptual framework in that:

Accepted Answer

The answer of The FASB and IASB joint conceptual framework...

Question 16

One benefit that may derive from the Memorandum of Understanding is that:

Accepted Answer

The primary benefit of a Memorandum of Understanding involving IOSCO is to facilitate the cross-border exchange of information to ensure compliance with securities laws and regulations.

Question 17

The SEC study of a principles-based system identifies each of the following characteristics that should guide standards setting except for:

Accepted Answer

The SEC study suggests that principles-based standards should not minimize the detail and structure, but instead provide enough detail and guidance to be operationalized and consistently applied. Therefore, option D is not a characteristic that should guide standards setting.

Question 18

IFRS tends to be more ____________ than U.S.GAAP.

Accepted Answer

IFRS is principles-based, meaning it focuses on the underlying economic substance of transactions rather than strict adherence to detailed rules. In contrast, US GAAP is generally considered to be more rules-based, with specific accounting guidance for different transactions.

Question 19

The number of countries that are expected to adopt IFRS as their home country standards by 2011 is:

Accepted Answer

According to the International Accounting Standards Board, as of 2020, 150 countries have adopted IFRS as their home country standards. It is important to note that this number may change in the future.

Question 20

The SEC roadmap refers to:

Accepted Answer

The answer of The SEC roadmap refers to:
...

Quiz 8: International Financial Reporting: Ethics and Corporate Governance Considerations