Ch. 1,2 & 4 - quiz

Question 1

Managerial accounting information is used mainly by external users.

True or False

Answer 1

False

Question 2

In Germany, traditionally, financial accounting and tax accounting are closely aligned. Therefore, managerial accounting traditionally does not play an important role.

True or False

Answer 2

False

Question 3

Financial accounting provides budgeting information to a company’s managers.

True or False

Answer 3

False

Question 4

For most companies, company management, equity investors (owners) and debt investors (creditors) are the most important addressees of financial reporting.

True or False

Answer 4

True

Question 5

Financial accounting information is backward looking. Therefore it is not useful to investors who are interested in forecasting future cash flows and the risks associated with these cash flows.

True or False

Answer 5

False

Question 6

Supervisory boards (boards of directors) of stock-listed companies
crucially depend on the quality of the companies’ financial reporting.

True or False

Answer 6

True

Question 7

A major function of financial accounting is to provide budgeting information to a company’s managers.

True or False

Answer 7

False

Question 8

Legal business entities (that exceed certain minimum size thresholds) are required to prepare single-entity financial statements. However, single-entity statements do not adequately present the financial position or the performance of a group. Therefore, under certain conditions groups must prepare consolidated financial statements, in addition to the individual financial statements

True or False

Answer 8

True

Question 9

A major driver behind the international harmonization of accounting is the growth of global financial markets, in particular, the growth of foreign exchange markets.

True or False

Answer 9

False

Question 10

In the 1960s, European countries started to strive for a harmonization of accounting. With the 4th, the 7th, and the 8th directive, a complete harmonization was achieved within the European Union

True or False

Answer 10

False

Question 11

Financial statements according to traditional German GAAP are strictly investor oriented; interests of other stakeholders are not considered.

True or False

Answer 11

False

Question 12

Financial statements according to IFRS are not used to measure the amounts available for dividend payments in Germany.

True or False

Answer 12

True

Question 13

IFRS is an accounting system that stands in the tradition of AngloSaxon accounting systems („little brother of US GAAP“); in line with this, the members of the IASB come exclusively from Anglo-Saxon
countries, such as the US, the UK and Australia.

True or False

Answer 13

False

Question 14

Traditionally, accounting systems in Continental Europe allow for more
accounting choices than those in Anglo-Saxon countries.

True or False

Answer 14

True

Question 15

Since 2005, German companies can choose whether to prepare their unconsolidated single-entity financial statements according to the German Commercial Code (HGB) or IFRS.

Answer 15

False

Question 16

Identify the best possible statement

A. Accounting measures business activities.

B. Accounting processes data into reports and communicates the data to decision makers.

C. Accounting is often called the language of business.

D. All three answers above are correct.

Answer 16

D

Question 17

Which statement is correct?

A. The dominant accounting principle in Continental European countries is the prudence principle; therefore companies mostly have to measure their inventories and other assets at current cost.

B. The dominant accounting principle in Anglo-Saxon countries is the „true and fair view“; therefore accounting rules have relatively few options and relatively wide scope so as to allow companies to report assets, liabilities and income in
the most accurate way.

C. Traditionally, financial accounting and tax accounting are closely linked in Continental European countries; as a result, there is a tendency for companies to understate their assets and overstate their liabilities.

D. An important user group of financial statements in Continental European countries are the companies‘ creditors; to satisfy their information needs, financial reporting requirements mandate very far-reaching disclosures.

Answer 17

C

Question 18

For which financial statements is the application of IFRS mandatory
in Germany?

A. Single-entity financial statements of companies whose shares are listed on stock exchanges.

B. Consolidated financial statements of companies whose shares are listed on stock exchanges.

C. Consolidated financial statements of companies whose shares are not listed on stock exchanges.

D. Single-entity financial statements of companies whose shares are not listed on stock exchanges

Answer 18

B

Question 19

Which statement is correct?

A. The IFRS Foundation appoints the members of the International Accounting Standards Board (IASB) in accordance with the provisions of the IFRS Foundation Constitution.

B. The IFRS Interpretation Committee has the task to issue interpretations to all new International Financial Reporting Standards (IFRSs).

C. The International Accounting Standards Board (IASB) develops
interpretations to all of the older International Accounting Standards (IASs) that were developed by the International Accounting Standards Committee (IASC) until 2001.

D. The IFRS Interpretation Committee provides a forum for participation by organizations and individuals with an interest in international financial reporting

Answer 19

A

Question 20

Which statement is correct?

A. Over the past two decades, national capital markets have become more and more segmented; thus, investors demand internationally comparable financial
reporting information to make efficient investment decisions.

B. International diversification is beneficial because it allows investors to reduce the risk of their investments; thus, investors demand internationally comparable financial reporting information to make efficient investment decisions.

C. International diversification increases the risk of investments; thus, investors demand internationally comparable financial reporting information to make efficient investment decisions.

D. International diversification allows investors to attain higher expected returns on their investments; thus, investors demand internationally comparable
financial reporting information to make efficient investment decisions.

Answer 20

B