Financial Reporting Standarts Flashcards
Which of the following is not an objective of financial statements as expressed by the International Accounting Standards Board?
A. To provide information about the performance of an entity.
B. To provide information about the financial position of an entity.
C. To provide information about the users of an entity’s financial statements.
C is correct. Providing information about users is not an objective of financial Statements. The objectives are to provide information about the entity’s financial position, performance, and changes in financial position.
International accounting standards are currently developed by which entity?
A. The Financial Services Authority.
B. The International Accounting Standards Board.
C. The International Accounting Standards Committee.
B is correct. The IASB is currently charged with developing International Accounting Standards. The IASC was the predecessor organization to the IASB.
U.S. Financial Accounting Standards are currently developed by which entity?
A. The United States Congress.
B. The Financial Services Authority.
C. The Financial Accounting Standards Board.
C is correct. U.S. Financial Accounting Standards are developed by the FASB.
Which of the following is not a constraint on the financial statements according to the IFRS Framework?
A. Timeliness.
B. Understandability. C. Benefit versus cost.
B is correct. The Framework recognizes the following constraints on providing relevant, reliable information: timeliness, benefit versus cost, and balancing of the qualitative characteristics.
The assumption that an entity will continue to operate for the foreseeable future is called
A. accrual basis.
B. comparability.
C. going concern.
C is correct. The IFRS Framework identifies two important underlying assumptions of financial Statements: accrual basis and going concern. Going concern is the assumption that the entity will continue to operate for the foreseeable future. Enterprises with the intent to liquidate or materially curtail operations would require different information for a fair presentation.
The assumption that the effects of transactions and other events are recognized when they occur, not necessarily when cash movements occur, is called
A. accrual basis.
B. going concern.
C. relevance.
A is correct. The IFRS Framework identifies two important underlying assumptions of financial statements: accrual basis and going concern. Accrual basis reflects the effects of transactions and other events being recognized when they occur, not necessarily when cash movements occur. These effects are recorded and reported in the financial statements of the periods to which they relate.
Neutrality of information in the financial statements most closely contributes to which qualitative characteristic?
A. Relevance.
B. Reliability
C. Comparability.
B is correct. The qualitative characteristic of reliability is contributed to by faithful representation, substance over form, neutrality, prudence, and completeness.
Valuing assets at the amount of cash or equivalents paid or the fair value of the consideration given to acquire them at the time of acquisition most closely describes which measurement of financial statement elements?
A. Current cost.
B. Realizable cost.
C. Historical cost.
C is correct. Historical cost is the consideration paid to acquire an asset.
The valuation technique under which assets are recorded at the amount that would be received in an orderly disposal is
A. current cost.
B. present value.
C. realizable value.
C is correct. The amount that would be received in an orderly disposal is realizable value.
Which of the following is not a required financial statement according to lAS No. 1?
A. Income statement.
B. Statement of changes in equity.
C. Statement of changes in income.
C is correct. Under lAS No. 1, a complete set of financial statements includes: a balance sheet, an income Statement, a statement of changes in equity, a cash flow statement, and notes comprising a summary of significant accounting policies and other explanatory notes.
In the past, the Financial Accounting Standards Board has been criticized as having
A. a rules-based approach to Standards.
B. a principles-based approach to standards.
C. an objectives-oriented approach to Standards.
A is correct.
The FASB has been criticized in the past as having a rules based approach; however, it has indicated that it is moving toward an objectives-oriented approach.
