FASB

Question 1

True/False
FASB sets develops standards for internal controls.

Answer 1

False

Question 2

True/False
FASB is a private-sector organization.

Answer 2

True

Question 3

Who issues Statements of Auditing Standards?

Answer 3

The AICPA

Question 4

What types of entities are required to use GAAP?

Answer 4

Public, government, some private firms

Question 5

When FASB refers to “negative economic consequences,” they are referring to…

Answer 5

the inability to raise capital, issue/sell stock

Question 6

Amendments to the Codification are issued as what?

Answer 6

ASUs - accounting standards updates

Question 7

Standards for the preparation of financial statements are primarily based on what?

Answer 7

The needs of decision makers, statement users, and those who are making economic decisions based on the information presented.

Question 8

What comprises the conceptual framework?

Answer 8

FASB’s Statements of Financial Accounting Concepts

Question 9

True/False
Qualitative characteristics of accounting information contain 2 primary characteristics and 4 enhancing characteristics.

Answer 9

True

Question 10

What are the two primary qualitative characteristics of accounting information?

Answer 10

Relevance (predictive value, confirmatory value, and materiality)
Faithful representation (completeness, neutrality, free from error)

Question 11

What are the four enhancing characteristics of accounting information?

Answer 11

comparability
verifiability
timeliness
understandability

Question 12

Does the Codification include AICPA Statements of Position?

Answer 12

yes

Question 13

What is capital maintenance in relation to the unit-of measure assumption?

Answer 13

Capital maintenance ( a departure from the UOM assumption) is when the firm has positive earnings for the year. It has earned enough to cover the cost of resources used to generate revenue and income leftover.

Question 14

What is physical capital maintenance in relation to the unit-of measure assumption?

Answer 14

Physical capital maintenance concept holds that earnings are not recognized until firm has provided for resources used during the period. THIS IS NOT GAAP.

Question 15

What two constraints does FASB describe in the conceptual framework?

Answer 15

Cost-benefit: the cost of providing information outweighs the benefit
Conservatism: reporting of less optimistic amount in times of uncertainty AND/OR a choice in recognition or measurement methods

Question 16

What approach to cash flow information and present value measurements does FASB use?

Answer 16

Expected cash flow approach - use expectations about all possible outcomes to calculate the PV (weighted average value)