Financial Reporting - Not for distribution in full. Instructors may a...

Testbank For

Financial Reporting 4 th Edition B y Janice Loftus Ken Leo Sorin Daniliuc Belinda Luke Hong Nee Ang Mike Bradbury Dean Hanlon Noel Boys Karyn Byrnes 1 / 4

Chapter 1: Accounting regulation and the Conceptual Framework

Not for distribution in full. Instructors may assign selected questions in their LMS.

Chapter 1: Accounting regulation and the Conceptual Framework

Multiple choice questions

• The Corporations Act requires the preparation of a financial report and directors' report each financial

year by all:

• small proprietary companies.
• non-disclosing entities.

*c. public companies.

• private companies.

General Feedback:

Learning objective 1.1 understand the major sources of regulation of financial reporting in Australia.

• The New Zealand External Reporting Board (XRB) accounting framework classify Tier 1 not-for-

profit public benefit entities (PBEs) as:

• entities allowed by law to use cash accounting.
• non-large.
• expenses <= $2m.

*d. publicly accountable, or large.

General Feedback:

Learning objective 1.3: Identify the roles of the key bodies involved in the financial reporting framework in New Zealand.

• Which of the following statements is false?

*a. The IFRS Advisory Council is directly accountable to the Monitoring Board.

• Australia adopted international accounting standards issued on or after 1 January 2005.
• The IASB and IFRS Interpretations Committee are appointed and overseen by a

geographically and professionally diverse group called the IFRS Foundation Trustees.

• The IASB is an independent standard-setting board that develops and approves International

Financial Reporting Standards.

General Feedback:

Learning objective 1.4: explain the structure, role and processes of the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRIC).

• Which of the following is not a chapter in the IASB's Conceptual Framework?

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Testbank to accompany Financial reporting 4e by Loftus et al.

• Measurement.
• Qualitative characteristics of useful financial reporting.
• The objective of general purpose financial reporting.

*d. The issues with financial reporting.

General Feedback:

Learning objective 1.5: explain the key components of the Conceptual Framework.

• Which of the following statements about the Conceptual Framework is true?
• The Conceptual Framework deals with the objective of special purpose financial statements.
• The Conceptual Framework for Financial Reporting provides guidelines intended to meet the

information needs of a range of users who are able to command that reports be prepared to their own particular needs.*c. The Conceptual Framework deals with the objective of general purpose financial statements.

• the Conceptual Framework for Financial Reporting, SAC 1, and SAC 2 provides guidelines

on the preparation of financial statements for a specific group of users.

General Feedback:

Learning objective 1.5: explain the key components of the Conceptual Framework.

6. The two fundamental qualitative characteristics of useful information are:

• materiality and timeliness.
• understandability and verifiability.
• faithful representation and comparability.

*d. relevance and faithful representation.

General Feedback:

Learning objective 1.6: explain the qualitative characteristics that make information in financial statements useful.

7. For information to be considered material:

• it must be complete.
• it must not include any bias.

*c. its omission or misstatement could influence users' decision-making.

• it has a predictive or confirmatory value.

General Feedback:

Learning objective 1.6: explain the qualitative characteristics that make information in financial statements useful.© John Wiley and Sons Australia, Ltd 20221.3 3 / 4

Chapter 1: Accounting regulation and the Conceptual Framework

Not for distribution in full. Instructors may assign selected questions in their LMS.

8. Costs of providing useful information include:

• collection and processing costs.
• dissemination costs.
• verification costs.

*d. All of these options are costs of providing useful information.

General Feedback:

Learning objective 1.6: explain the qualitative characteristics that make information in financial statements useful.

• If different independent observers could reach the same general conclusions that the information

represents, then the quality of the information has achieved:

• neutrality.
• understandability.

*c. verifiability.

• comparability.

General Feedback:

Learning objective 1.6: explain the qualitative characteristics that make information in financial statements useful.

• Which of the following statements about the going concern assumption is not true?
• it can justify the use of historical costs when measuring non-current assets.
• it supports the use of assets such as Prepaid Expenses.
• it supports the systematic allocation of depreciation over an asset's useful life.

*d. it is used when an entity goes into liquidation.

General Feedback:

Learning objective 1.7: describe the objective and scope of financial statements prepared by a reporting entity.

• Which of the following are the three essential criteria in the definition of an asset:

• I, III, VI.

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