2018, January

Question 1

What explains why the level three fair value of a long term liability varies inversely with the time to maturity but the value of a fixed asset varies positively with the expected remaining life of the asset?

Question 2

A) What is a true zero and what is an unequal interval?

B) What common measurements are ratio scale?

C) A higher distinction grade is measured on which scale?

Question 3

Explain which items accounting research has found to vary inversely with the earnings response coefficient and why the relationship exists at all in each case?

What is the significance of the post-earnings announcement drift?

Question 4

What claims are made by positive accounting theory about when accounts might be manipulated in the direction of a so-called “big bath”?

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Question 5

What are the four new capital categories invented by integrated reporting and give an example of events that cause each one to increase?

Question 6

What does institutional theory say about how a firm’s accounting behaviour changes over time?

Question 7

Renewable natural capital is exemplified by:

A) coal and gasoline

B) wind and seawater

C) wheat and corn in the fields

Question 8

An example of a theorem is

A) E = MC²

B) A² = B² + C² when AB and C are the sides of a right-angled triangle

C) PV = Net future cash flow times the reciprocal of (1 plus the cost of capital as a decimal) to the power of the number of years into the future that the cash flow occurs – for single cash flow

Answer 8

An example of a theorem is

A) E = MC²

B) A² = B² + C² when AB and C are the sides of a right-angled triangle

C) PV = Net future cash flow times the reciprocal of (1 plus the cost of capital as a decimal) to the power of the number of years into the future that the cash flow occurs – for single cash flow

Question 9

The principle of substance over form is illustrated in the preferred (by IFRS and AASB) treatment of

A) long leases

B) intangible assets

C) short leases

Question 10

Which of the following measures or metrics is ratio scaled?

A) closing inventory

B) the year 2017

C) temperature in degrees Kelvin

Question 11

Private interest theory applies when regulations are framed

A) to suit the preferences of the people being regulated

B) to comply with the preferences of a third party who is neither the state nor the people being directly regulated

C) to benefit only a small minority of society

Question 12

The conflict between agency and stakeholder theory centres on

A) what good corporate governance requires

B) whether profits should be shared amongst stakeholders generally rather than shareholders particularly

C) whether the board or the shareholders are the primary focus of accountability

Question 13

Good corporate governance requires a majority of board members to be

A) executive

B) financially literate

C) independent

Question 14

Negative equity implies

A) economic insolvency

B) low earnings response coefficients

C) dirty surpluses

Question 15

Capitalising expenses in order to manipulate earnings declared in the accounts is

A) contrary to IFRS 3

B) a symptom of technical insolvency

C) fraudulent

Question 16

According to positive accounting theory, when directors’ remuneration largely depends on increases in reported net corporate earnings, then, if allowed by the auditors,

A) they will defer current income

B) they will defer current expenditure

C) they will minimise the value of closing inventory

Question 17

Fact or opinion?

The magnitude of the information content of accruals in annual accounts gives us information about the efficiency of the stock market.

Question 18

Fact or opinion?

Every problem in financial accounting can be solved with one of the theories available.

Question 19

Fact or opinion?

Type 2 failures happen much more often than type 1.

Question 20

Fact or opinion?

Profitability entails solvency.

Question 21

Fact or opinion?

Fair value is the market value if there is a market.

Question 22

Fact or opinion?

Credit ratings, such as AAA or BB+, are interval scaled metrics.

Question 23

Fact or opinion?

Stakeholder theory specifies opportunity as an ingredient of salience.

Question 24

Fact or opinion?

Accounting standards exemplify coercive isomorphism.

Question 25

Fact or opinion?

Kim Jong Un’s nuclear capability is salient to the implementation of US foreign policy.

Question 26

Fact or opinion?

Opportunity is an ingredient of salience.