Test Bank for Financial Reporting and Analysis, 8e

Version 1 1 Test Bank for Financial Reporting and Analysis, 8e Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer (All Chapters) chapter 1_ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.1) The role of financial accounting information is to facilitate economic transactions and to foster efficient allocation of resources among businesses and individuals.⊚ true ⊚ false

2) Financial reports provide information that can reduce investors’ uncertainty about the company’s opportunities and risks, thereby raising the company’s cost of capital.⊚ true ⊚ false

3) Comparability across companies allows analysts to identify real economic similarities in and differences between underlying economic events because those similarities or differences are not obscured by accounting methods or disclosure practices.⊚ true ⊚ false

4) Executive compensation contracts seldom contain annual bonus and longer term pay components tied to financial statement results, but instead usually rely on stock options as a means to reward managers in a manner that is less subject to manipulation by management.⊚ true ⊚ false

5) Congress stipulated that the SEC develop rules for companies to disclose information on use of “conflict minerals.” 1 / 4

Version 1 2 ⊚ true ⊚ false

6) The public and private sector regulatory agencies establish and enforce financial reporting requirements designed to ensure that companies meet certain minimum levels of financial disclosure.⊚ true ⊚ false

7) Although the SEC has the ultimate legal authority to set accounting principles in the U.S., it has looked to private-sector organizations (e.g., the FASB) to establish and enforce these principles.⊚ true ⊚ false

8) Management has considerable discretion over the particular accounting procedures used in the financial statements and over the details contained in related note disclosures.⊚ true ⊚ false

9) Accounting standard-setting in the U.S. is a technical process and thus little affected by political considerations.⊚ true ⊚ false

10) Government regulation provides the primary motivation for firms to disclose sustainability-related information.⊚ true ⊚ false

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Version 1 3 11) While an increasing percentage of companies report on sustainability, consistency in reporting continues to provide challenges for information users.⊚ true ⊚ false

12) The IASB and FASB have worked together to develop a single set of high-quality, understandable, enforceable and globally accepted international financial reporting standards.⊚ true ⊚ false

13) Foreign companies registered with the SEC that use IFRS no longer have to reconcile their financial statements to U.S. GAAP.⊚ true ⊚ false

14) U.S. GAAP has been criticized as being too "rules-based" thus allowing managers to invent "loopholes" that conform to the letter of a standard but simultaneously violate its spirit.⊚ true ⊚ false

15) The goal of the movement toward international convergence of accounting standards is a single set of accounting standards accepted worldwide and superior to the choices presently available.⊚ true ⊚ false

16) Regulators of industries granted monopoly privileges use financial statement data in setting the rates companies are permitted to charge for the services these industries provide.⊚ true ⊚ false 3 / 4

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17) Owners and managers have an economic incentive to supply the amount and type of financial information that will enable the company to raise capital at the lowest cost.⊚ true ⊚ false

18) Financial statement information can help customers monitor a supplier’s manufacturing processes and thus evaluate the quality of its products.⊚ true ⊚ false

19) The conceptual framework for financial reporting includes the standards of GAAP.⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.

20) A company’s financial statements reflect information about:

• future projections of sales, expenses, and other future economic events.
• product information and competitive positions.
• the general economy of the industry in which the company operates.
• economic events that affect a company that can be translated into accounting

numbers.

21) All financial statements:

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