3. The AASB Framework serves as a guide to the Australian Accounting Standards Board AASB in

1

Chapter 02 - The Conceptual Framework of Accounting and its Relevance to Financ

1. The AASB Framework has the force of law:

Ans:F

True False

• The Australian Accounting Standards Board (AASB) retained the use of its own conceptual framework even

after harmonisation:

Ans:F

True False

• The AASB Framework serves as a guide to the Australian Accounting Standards Board (AASB) in

developing accounting standards:

Ans:T

True False

• The Framework is considered to be an Australian Accounting Standards Board (AASB) standarD.

Ans:F

True False

• One of the uses of the Conceptual Framework is that it provides parameters for the exercise of judgement in

resolving accounting issues:

Ans:T

True False

6. When an AASB standard conflicts with the Framework, the former prevails:

Ans:T

True False

New Zealand Financial Accounting 6th Edition Deega Test Bank Visit TestBankDeal.com to get complete for all chapters

2

• The Framework defines principles for a specific accounting recognition, measurement and disclosure matter:

Ans:F

True False

• The Framework suggests that the relevance characteristic outweighs the reliability characteristic if the

financial statement is to be rendered useful:

Ans:F

True False

• The objective of financial statements is to provide future oriented information to help investors make

business decisions:

Ans:F

True False

• Relevance and reliability characteristics are placed as overriding qualities of financial statements over other

qualitative characteristics:

Ans:T

True False

• A separate recognition criteria for equity is not set forth in the Framework because it represents a residual

interest in the assets of an entity.

Ans:T

True False

• Social accountability is considered in the Framework as part of the objectives of general-purpose financial

reports.

Ans:F

True False

3

• The IASB and US FASB are jointly developing a common conceptual framework to guide both standard

setters in developing separate standards for their constituents.

Ans:F

True False

• For the preparation and presentation of financial statements, Australia adopts the IASB Framework and the

Statement of Accounting Concepts 1 to 4.

Ans:F

True False

• The IASB and US FASB are jointly developing a common conceptual framework because this is necessary

for the Convergence Project which aims to converge two sets of accounting standards.

Ans:T

True False

• Prudence is exercised in the preparation and presentation of financial statements when asset values are never

shown in excess of their realisable values but could be understated, and liabilities are never to be understated.

Ans:F

True False

• The efficiency perspective is consistent with limiting accounting policy choices in the interest of

consistency and comparability.

Ans:F

True False

• The trade-off between relevance and reliability requires exercise of judgment constrained by timeliness and

costs versus benefits.

Ans:T

True False

4

• A central goal in establishing a conceptual framework of accounting will be to obtain general consensus on:

• the scope and objectives of financial reporting.
• the qualitative characteristics that financial information should possess.
• what the elements of financial reporting are, including agreement on the characteristics and recognition

criteria for assets, liabilities, income, expenses and equity.

• All of the given answers.
• the scope and objectives of financial reporting and the qualitative characteristics that financial information

should possess.

• Which of the following factors should be considered in order to determine whether an entity is a reporting

entity when it is not obvious that users exist who would be dependent on the financial reports of the entity.

• Separation of management from those with economic interest in the entity.
• Economic or political importance/influence.
• Financial characteristics.
• All of the given answers.
• Separation of management from those with economic interest in the entity and economic or political

importance/influence.

• Mr and Mrs K Urban are partners in Urban Ltd a music shop with sales revenue of $5,000,000 per annum,

total assets of $10,000,000 and employees totalling 15. Blank Ltd is:

• a reporting entity because there are at least two users of a financial report.
• not likely to be a reporting entity because it is unlikely to have users dependent on its financial reports.
• likely to be a reporting entity because there are two shareholders and it is an exempt proprietary entity.
• not a reporting entity because small proprietary companies are frequently not considered reporting entities.
• is a reporting entity because total assets of the entity is greater than $5,000,000.