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symbol.
2. The conceptual framework for financial reporting consists of how many levels?
A.
B.
C.
D.
1
2
3
4
Correct! There are 3 levels, the Why, the Bridge between levels 1 & 3, and the
How.
3. Which of the following statements is true regarding the convergence project by the
FASB and IASB?
A. The converged framework will be a series of documents, similar to the two
conceptual frameworks that presently exist.
B. The existing conceptual frameworks underlying U.S. GAAP and IFRS are quite
dissimilar, but once they are converged there will be unanimity.
The IASB framework makes two assumptions.
C.
D. The FASB framework discusses accrual accounting and identifies it as an
assumption.
Correct! The IASB framework makes two assumptions accrual basis and going
concern. The converged framework will be a single document, the existing
frameworks are very similar, and while the FASB framework discusses accrual
4. In the conceptual framework for financial reporting, what provides "the how" the
implementation of accounting?
A. Measurement and recognition concepts such as assumptions, principles, and
constraints.
B. Qualitative characteristics of accounting information.
Elements of financial statements.
C.
Objective of financial reporting.
D.
Correct! The how or the implementation of accounting is provided through the
recognition, measurement, and disclosure concepts.
decision usefulness.
understandability.
reliability.
comparability.
6. For information to be relevant, it must have both predictive value and confirmatory
value.
True
False
A.
B.
7. Which of the following is not among the ingredients of the fundamental quality of
faithful representation?
A.
B.
C.
D.
neutrality.
materiality.
completeness.
comparability.
understandability.
neutrality.
timeliness.
11. The change in net assets during a period from transactions and other events and
circumstances from non-owner sources is called
A.
B.
C.
D.
net income.
gains.
comprehensive income.
revenues.
Correct! Comprehensive income is the change in net assets during a period from
transactions and other events and circumstances from non-owner sources.
12. An increase in net assets arising from peripheral or incidental transactions is called
a(n)
A.
B.
C.
D.
asset.
revenue.
gain.
investment by owners.
14. The periodicity assumption specifies that the most appropriate time periods for
financial reporting are weekly, bi-monthly, and yearly.
True
A.
B.
False
15. Depreciation and amortization policies are justifiable and appropriate because of the:
A.
B.
C.
D.
Correct! The going concern assumption is the justification for depreciation and
amortization.
16. A contract is an agreement between two parties that creates enforceable rights or
obligations.
A.
True
False
B.
Incorrect. A contract is an agreement between two parties that creates enforceable
rights or obligations.
cash is received.
performance obligation is satisfied.
product is produced.
All of these answer choices are correct.
18. Which of the following statements about the fair value principle is true?
Fair value is a market-based measure.
A.
B. Fair value is generally less relevant than historical cost.
C. Measurements based on fair value increase the objectivity in financial
reporting.
D. GAAP requires the use of fair value for financial assets and financial liabilities.
Correct! Fair value is more relevant, more subjective, and GAAP gives companies
the option of using fair value for financial assets and financial liabilities.
19. The difficulty in cost-benefit analysis is that the benefits are usually evident and
easily measurable, while the costs are not always evident or measurable.
A.
B.
True
False
Correct! The difficulty in cost-benefit analysis is that the costs and especially the
benefits are not always evident or measurable.
20. The existing conceptual frameworks underlying IFRS and GAAP are strikingly
different and the FASB and IASB will likely change many aspects of each of the
frameworks in order to create a common conceptual framework.
A.
B.
True
False
Correct! The existing conceptual frameworks underlying IFRS and GAAP are very
similar and there is no need to change many aspects of the existing frameworks.