Intermediate Accounting, Volume 1, 2e

Intermediate Accounting, Volume 1, 2e Chapter 2 – Conceptual Frameworks for Financial Reporting 2-1 Copyright © 2014 Pearson Canada Inc.Chapter 2 Conceptual Frameworks for Financial Reporting Learning Objective 1 1) Which of the following is NOT a purpose of a conceptual framework of accounting concepts and financial reporting objectives?

• To increase the user's ability to understand financial statements.
• To increase financial statement users' confidence in financial reporting.
• To provide a foundation for detailed accounting and reporting rules.
• To enhance comparability among companies' financial statements.

Answer: C

Diff: 1

Skill: Conceptual

Objective: 2.1 Explain the role of a conceptual framework for financial reporting and the reasons for having conceptual frameworks.2) Which of the following is NOT correct about the conceptual framework in accounting?

• It is the basis for standard-setting for accounting standard setting bodies.
• It is based on fundamental accounting truths derived from the laws of nature.
• It can be used to solve emerging or complex accounting problems.
• It can be used to develop consistent and comparable accounting principles.

Answer: B

Diff: 1

Skill: Conceptual

Objective: 2.1 Explain the role of a conceptual framework for financial reporting and the reasons for having conceptual frameworks.3) Which is a purpose of the conceptual framework in accounting?

• To support principles-based accounting standards, principles and practices.
• To provide rules from which decision-useful financial information can be developed.
• To promote global consistency, acceptance and adoption of IFRS around the globe.
• To develop different accounting practices between countries around the globe.

Answer: A

Diff: 1

Skill: Conceptual

Objective: 2.1 Explain the role of a conceptual framework for financial reporting and the reasons for having conceptual frameworks.4) The underlying or fundamental objective of the accounting conceptual framework is

• decision usefulness.
• comparability.
• representational faithfulness.
• understandability.

Answer: A

Diff: 1

Skill: Conceptual

Objective: 2.1 Explain the role of a conceptual framework for financial reporting and the reasons for having conceptual frameworks.Intermediate Accounting Vol 1 Canadian 2nd Edition Lo Test Bank Visit TestBankDeal.com to get complete for all chapters

Intermediate Accounting, Volume 1, 2e Chapter 2 – Conceptual Frameworks for Financial Reporting 2-2 Copyright © 2014 Pearson Canada Inc.5) Provide three reasons for the importance of the conceptual framework for financial reporting.Answer: A conceptual framework is like a strategic business plan that identifies demands of users and how to supply a product that meets those demands.The framework provides overall plans to guide implementation: the evaluation of more specific accounting standards and the application of accounting standards to specific circumstances.As business plans, they differ in response to variations in the environments for which they are developed, and they change from time to time to respond to changes in market conditions.It provides the foundational principles, assumptions and principles upon which accounting standards are built.This foundation ensures accounting standards are consistent with each other (e.g. the definition of an "asset" ensures that the accounting for fixed assets and intangible assets are based on consistent recognition criteria).The foundational concepts help accountants determine the appropriate accounting in circumstances for which specific standards may not exist.

Diff: 2

Skill: Conceptual

Objective: 2.1 Explain the role of a conceptual framework for financial reporting and the reasons for having conceptual frameworks.6) Which of the following is part of the IFRS Framework?

• Statement of financial position.
• Elements of financial statements.
• Information Asymmetry.
• Financial statement notes.

Answer: B

Explanation: B) These are the basic items/categories of items that appear in the financial statements

Diff: 2

Skill: Conceptual

Objective: 2.1 Explain the role of a conceptual framework for financial reporting and the reasons for having conceptual frameworks.

Intermediate Accounting, Volume 1, 2e Chapter 2 – Conceptual Frameworks for Financial Reporting 2-3 Copyright © 2014 Pearson Canada Inc.Learning Objective 2 1) Which is NOT a qualitative characteristic of financial information in the IFRS Framework?

• Understandability.
• Historical cost.
• Representational faithfulness.
• Comparability.

Answer: B

Diff: 1

Skill: Conceptual

Objective: 2.2 Explain the rationale for each of the eight major components of these frameworks and synthesize these components into an integrated whole.2) Which is an assumption of financial information in the IFRS Framework?

• Accrual basis of accounting.
• Historical cost.
• Timeliness.
• Financial capital maintenance.

Answer: D

Diff: 1

Skill: Conceptual

Objective: 2.2 Explain the rationale for each of the eight major components of these frameworks and synthesize these components into an integrated whole.3) Which is NOT an element of financial information in the IFRS Framework?

• Other comprehensive income.
• Assets.
• Income.
• Liabilities.

Answer: A

Diff: 1

Skill: Conceptual

Objective: 2.2 Explain the rationale for each of the eight major components of these frameworks and synthesize these components into an integrated whole.4) Which is NOT a criteria for recognition of financial information in the IFRS Framework?

• The amount is reasonably measurable.
• The expenses should be matched with revenues.
• The amount must be measured at historical cost.
• Inflow of outflow of cash flows are probable.

Answer: C

Diff: 1

Skill: Conceptual

Objective: 2.2 Explain the rationale for each of the eight major components of these frameworks and synthesize these components into an integrated whole.

Intermediate Accounting, Volume 1, 2e Chapter 2 – Conceptual Frameworks for Financial Reporting 2-4 Copyright © 2014 Pearson Canada Inc.5) Who are NOT users of financial information under the IFRS Framework?

• Present investors.
• Potential investors.
• Creditors.
• Management.

Answer: D

Diff: 1

Skill: Conceptual

Objective: 2.2 Explain the rationale for each of the eight major components of these frameworks and synthesize these components into an integrated whole.6) What is NOT an information need of users of financial information under the IFRS Framework?

• Information on the amount of cash flows.
• Information about the timing of future cash flows.
• Information on the uncertainty of cash flows.
• Information about the amount of past cash flows.

Answer: D

Diff: 2

Skill: Conceptual

Objective: 2.2 Explain the rationale for each of the eight major components of these frameworks and synthesize these components into an integrated whole.7) Which financial statement is NOT needed under the IFRS Framework?

• Balance sheet.
• Statement of retained earnings.
• Income statement.
• Statement of cash flows.

Answer: B

Diff: 2

Skill: Conceptual

Objective: 2.2 Explain the rationale for each of the eight major components of these frameworks and synthesize these components into an integrated whole.8) What information does the balance sheet provide to users of financial information under the IFRS Framework?

• Information about changes in liabilities over a period of time.
• Information about changes in resources over a period of time.
• Information about the performance of a company over a period of time.
• Information about the state of a company at a point in time.

Answer: D

Diff: 2

Skill: Conceptual

Objective: 2.2 Explain the rationale for each of the eight major components of these frameworks and synthesize these components into an integrated whole.