Understanding Australian

Testbank

to accompany

Understanding Australian Accounting Standards

By Janice Loftus, Ruth Picker, Ken Leo, Victoria Wise and Kerry Clark

Prepared by Yeny Lukito

(For Complete File Download Link at the end of this File) 1 / 4

Chapter 1: Accounting Regulation and the Conceptual Framework

© John Wiley & Sons Australia, Ltd 2013 1.1

Chapter 1: Accounting Regulation and the Conceptual Framework

Learning Objectives:

Learning Objective 1.1 Identify the key sources of regulation of financial reporting in Australia and explain how they relate to each other, and assess whether an entity is required to prepare financial statements that comply with Australian Accounting Standards.Learning Objective 1.2 Identify the role played by the following bodies in accounting regulation

in Australia: the Financial Reporting Council (FRC), the Australian

Accounting Standards Board (AASB), the Australian Securities and Investments Commission (ASIC), the Financial Reporting Panel (FRP), the Australian Prudential Regulatory Authority (APRA), and the Australian Securities Exchanges Group (ASX).Learning Objective 1.3 Explain the structure, role and processes of the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee

(IFRIC).

Learning Objective 1.4 Explain the key components of the Conceptual Framework.Learning Objective 1.5 Explain the qualitative characteristics that make information in financial statements useful.Learning Objective 1.6 Discuss the assumption underlying the preparation of financial statements.Learning Objective 1.7 Define the basic elements in financial statements – assets, liabilities, equity, income and expenses.Learning Objective 1.8 Explain the principles for recognising the elements of financial statements.Learning Objective 1.9 Distinguish between alternatives bases for measuring the elements of financial statements.Learning Objective 1.10 Outline concepts of capital maintenance.

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Test Bank to accompany Understanding Australian Accounting Standards © John Wiley & Sons Australia, Ltd 2013 1.2 Chapter 1 Accounting Regulation and the Conceptual Framework

Testbank - Multiple choice

• The Corporations Act requires the following entities to prepare a financial report, except for:

Learning Objective 1.1 Identify the key sources of regulation of financial reporting in Australia and explain how they relate to each other, and assess whether an entity is required to prepare financial statements that comply with Australian Accounting Standards.

• public companies.

*b. small proprietary companies.

• large proprietary companies.
• registered schemes.

• Which of the following entities is a large proprietary company?

Learning Objective 1.1 Identify the key sources of regulation of financial reporting in Australia and explain how they relate to each other, and assess whether an entity is required to prepare financial statements that comply with Australian Accounting Standards.

• A company that earns $30 million of annual revenue, controls $10 million of assets, and has 25

employees.

• A company that earns $20 million of annual revenue, controls $8 million of assets, and has 40

employees.

• A company that earns $15 million of annual revenue, controls $15 million of assets, and has 30

employees.*d. A company that earns $22 million of annual revenue, controls $14 million of assets, and has 55 employees.

• YinYang Ltd. is a company listed on the ASX, with a total number of 250 non-employee shareholders

owning the company’s shares and 60 employees working at the company. Which of the following statements about Yinyang Ltd. is incorrect?Learning Objective 1.1 Identify the key sources of regulation of financial reporting in Australia and explain how they relate to each other, and assess whether an entity is required to prepare financial statements that comply with Australian Accounting Standards.*a. Yinyang Ltd. is proprietary company.

• Yinyang Ltd. is a disclosing entity.
• Yinyang Ltd is a public company.
• Yinyang Ltd. is required to prepare a financial report.

• Section 297 of the Corporations Act states that financial statements must provide a true and fair view of

an entity’s financial position and performance. However, when compliance with the accounting standards results in financial statements which would not produce a true and fair view, the Corporations

Act requires the entity to:

Learning Objective 1.1 Identify the key sources of regulation of financial reporting in Australia and explain how they relate to each other, and assess whether an entity is required to prepare financial statements that comply with Australian Accounting Standards.

• not comply with the accounting standards.
• not comply with the accounting standards and write a letter to the shareholders explaining the

non-compliance. 3 / 4

Chapter 1: Accounting Regulation and the Conceptual Framework

© John Wiley & Sons Australia, Ltd 2013 1.3 *c. still comply with the accounting standards and provide additional information in the notes to the financial statements to give a true and fair view.

• request an exemption from the AASB.

• What is the essential factor in identifying whether an entity is a reporting entity?

Learning Objective 1.1 Identify the key sources of regulation of financial reporting in Australia and explain how they relate to each other, and assess whether an entity is required to prepare financial statements that comply with Australian Accounting Standards.*a. Existence of users dependent on general purpose financial statements to make decisions.

• Existence of users who are able to demand financial statements to meet their specific needs.
• Whether the entity is listed on the ASX or not.
• Total revenue earned.

• Which regulatory body has the responsibility for overseeing the standard-setting process in Australia?

Learning Objective 1.2 Identify the role played by the following bodies in accounting regulation in Australia: the Financial Reporting Council (FRC), the Australian Accounting Standards Board (AASB), the Australian Securities and Investments Commission (ASIC), the Financial Reporting Panel (FRP), the Australian Prudential Regulatory Authority (APRA), and the Australian Securities Exchanges Group (ASX).

• AASB

*b. FRC

• APRA
• ASIC

7. The following statements about the AASB are correct, except:

Learning Objective 1.2 Identify the role played by the following bodies in accounting regulation in Australia: the Financial Reporting Council (FRC), the Australian Accounting Standards Board (AASB), the Australian Securities and Investments Commission (ASIC), the Financial Reporting Panel (FRP), the Australian Prudential Regulatory Authority (APRA), and the Australian Securities Exchanges Group (ASX).

• The AASB has the authority to issue Australian Accounting Standards.
• The AASB has power to establish committees, advisory panels, and consultative groups.
• Members of the AASB are appointed by the FRC.

*d. Chair of the AASB is appointed by the FRC.

• An independent body established in 2006 to resolve disputes between ASIC and companies is:

Learning Objective 1.2 Identify the role played by the following bodies in accounting regulation in Australia: the Financial Reporting Council (FRC), the Australian Accounting Standards Board (AASB), the Australian Securities and Investments Commission (ASIC), the Financial Reporting Panel (FRP), the Australian Prudential Regulatory Authority (APRA), and the Australian Securities Exchanges Group (ASX).

• APRA

*b. FRP

• FRC
• ASX

9. Members of the IASB are appointed by:

Learning Objective 1.3 Explain the structure, role and processes of the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRIC).

• the Monitoring Board.
• the IFRS Advisory Council.

*c. the IFRS Foundation Trustees.

• the IFRS Interpretations Committee.
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