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Flashcards in Chapter 3 Deck (53):
1

According to Sir Bryan Carsberg, former IASC Secretary-General, what is the most significant cost of accounting diversity?
A) The time expended by accountants to create multiple sets of financial statements conforming to different national standards
B) The cost of the IASB to regulate compliance with many national accounting standards
C) The reduction in effectiveness of the international markets for capital
D) The resources used by countries in legislating different sets of accounting standards

C) The reduction in effectiveness of the international markets for capital

2

From a practical standpoint, what is the goal of accounting standards harmonization?
A) Creating one set of standards used throughout the world
B) Reducing the conflict among national accounting standards
C) Producing accounting standards that are unique for each country
D) Forcing compliance with IASB regulations

B) Reducing the conflict among national accounting standards

3

De jure harmonization refers to:
A) the process of making accounting practice consistent across countries.
B) the process of making accounting regulations consistent internationally.
C) forcing accounting differences to be resolved through jury trials.
D) eliminating the need to have different accounting methods.

B) the process of making accounting regulations consistent internationally.

4

De facto harmonization refers to:
A) the process of making accounting practice consistent across countries.
B) the process of making accounting regulations consistent internationally.
C) forcing accounting differences to be resolved through litigation.
D) creating one set of accounting standards.

A) the process of making accounting practice consistent across countries

5

Which of the following statements is true about accounting convergence?
A) Convergence is a synonym for harmonization.
B) Convergence is the opposite of standardization.
C) Convergence, unlike harmonization, takes place over a period of time.
D) Convergence means developing high-quality standards in partnership with national standard-setters.

D) Convergence means developing high-quality standards in partnership with national standard-setters.

6

Which of the following statements is believed to be true about accounting convergence by proponents of convergence?
A) Convergence would decrease feelings of nationalism.
B) Convergence is desirable because there is little difference among capital markets in different countries.
C) Convergence would help to raise the quality of accounting practice internationally.
D) None of the above statements is true.

C) Convergence would help to raise the quality of accounting practice internationally.

7

Which of the following items is considered to be the most significant impediment to accounting convergence?
A) Nationalism
B) Lack of accounting knowledge
C) Language differences
D) High cost of convergence

A) Nationalism

8

In addition to the International Accounting Standards Board (IASB), which of the following organizations was considered to be one of the two most important forces in efforts to harmonize accounting standards?
A) U.S. Financial Accounting Standards Board (FASB)
B) United Nations (UN)
C) North Atlantic Treaty Organization (NATO)
D) European Union (EU)

D) European Union (EU)

9

It has been said that the addition of 10 new members to the European Union in 2004 is likely to significantly change the dynamics within the EU. What was the explanation given for this statement?
A) The EU is getting too large to manage effectively.
B) The members added in 2004 have very different economic traditions than the 15 members that joined before 2004.
C) The members added in 2004 have more economic power than the members that joined the EU between 1957 and 1995.
D) The purchasing power of the EU was weakened by the addition of additional members.

B) The members added in 2004 have very different economic traditions than the 15 members that joined before 2004.

10

Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia joined the European Union in 2004. Besides membership in the EU, what do these countries have in common?
A) They share a common language.
B) They were previously under the political and economic influence of the Soviet Union.
C) All were under the political control of Germany until the early 1960's.
D) They were former British colonies until after World War II.

B) They were previously under the political and economic influence of the Soviet Union.

11

The “Fourth Directive” issued by the European Commission, which administers the European Union (EU), deals with which of the following?
A) Adoption of the Euro as the currency used throughout the EU
B) Consolidated financial statements
C) Rules for valuation, financial statement disclosures, and format
D) Authority of the European Commission to pass laws

C) Rules for valuation, financial statement disclosures, and format

12

The “Seventh Directive” issued by the European Commission is a statement to the European Union (EU) members concerning:
A) adoption of the Euro as the currency used throughout the EU.
B) consolidated financial statements.
C) rules for valuation, financial statement disclosures, and financial statement format.
D) authority of the European Commission to pass laws.

B) consolidated financial statements.

13

In preparation for admission to the European Union, Hungary, Poland, and the Czech Republic passed new accounting laws based on EU Directives. How were these new laws different from their previous accounting laws?
A) The new laws are easier to enforce than the previous laws.
B) The new accounting regulations are written in English, whereas the earlier accounting standards were written in Russian.
C) The new laws are less flexible than their earlier accounting laws.
D) The new laws are market-oriented and their earlier accounting laws were Soviet-style.

D) The new laws are market-oriented and their earlier accounting laws were Soviet-style.

14

In 1990, the European Commission stopped issuing directives related to accounting. Why?
A) The EU was leaving the formulation of accounting standards up to the IASC.
B) The European Commission had finished the task of formulating accounting standards for the European Union.
C) Accounting harmonization had been completed.
D) The Commission found that its directives were unenforceable.

A) The EU was leaving the formulation of accounting standards up to the IASC.

15

The early (1973-1988) harmonization efforts of the International Accounting Standards Committee (IASC) created standards that have been described as a “lowest common denominator” approach. What was the effect of these first international accounting standards?
A) The IASC standards accommodated existing accounting practice in various countries.
B) Comparability of financial statements across countries was achieved.
C) It resulted in few companies being in compliance with IASC standards.
D) All of the above

A) The IASC standards accommodated existing accounting practice in various countries.

16

The second phase (1989-1993) of the IASC's efforts to harmonize accounting standards was aimed at what goal?
A) Making international accounting standards more flexible
B) Creating greater financial statement comparability across countries
C) Adding new alternatives for accounting practice desired by the international community
D) Strengthening the enforcement power of the IASC

B) Creating greater financial statement comparability across countries

17

Which of the following is NOT an objective of the International Accounting Standards Board?
A) To establish worldwide uniformity of accounting practice
B) To develop a single set of enforceable global accounting standards
C) To promote the use and application of global accounting standards
D) To encourage convergence of national accounting standards and international accounting standards

A) To establish worldwide uniformity of accounting practice

18

Of the 16 members of the International Accounting Standards Board (IASB), how many must have experience as auditors?
A) 0
B) 3
C) 5
D) 12

A) 0

19

Of the 16 members of the International Accounting Standards Board (IASB), how many work for the board on a full-time basis?
A) 8
B) 13
C) 10
D) 0

B) 13

20

To create an appropriate mix of members of the IASB, by 2012 there will be:
A) 8 auditors.
B) 8 academic representatives.
C) 4 members of the FASB.
D) a diverse geographical balance of members.

D) a diverse geographical balance of members.

21

Who was the first chairman of the International Accounting Standards Board?
A) Sir Walter Raleigh
B) Sir David Tweedie
C) Sir Paul McCartney
D) Sir Bryan Carsberg

B) Sir David Tweedie

22

The International Accounting Standards Board was preceded by:
A) the IOSCO.
B) the ASEAN.
C) the IASC.
D) the NRC .

C) the IASC.

23

The IFRS Foundation will normally have as its trustees how many senior partners of international accounting firms?
A) 0
B) 2
C) 5
D) 10

B) 2

24

The IASB is organized under an independent entity called:
A) the SEC.
B) the AFL.
C) the IFRSF.
D) INTERPOL.

C) the IFRSF.

25

Which of the following is NOT part of the due process followed by the IASB in formulating International Financial Reporting Standards?
A) A period of public comment is provided after discussion papers are prepared.
B) Standards are approved by a unanimous vote of the 16-member board.
C) Exposure drafts are published prior to taking a vote of the board.
D) National accounting standards and practices are studied before preparing exposure drafts.

B) Standards are approved by a unanimous vote of the 16-member board.

26

What basis does the International Accounting Standards Board use in formulating its IFRS?
A) Detailed rules to govern accounting practice
B) A framework of accounting principles
C) Typical tax laws of western nations
D) Exceptions or unusual circumstances that require special attention

B) A framework of accounting principles

27

Why does the IASB believe that a principles-based approach to standard setting is superior to a rules-based perspective?
A) Detailed prescriptions or rules encourage accountants to look for ways to circumvent the rules rather than trying to provide useful information.
B) Principles-based standard setting is less costly to undertake than rules-based standard formulation.
C) It is desirable to have all corporations in all countries using the same accounting practice.
D) A conceptual framework for standard setting has been demonstrated to encourage the greatest economic development.

A) Detailed prescriptions or rules encourage accountants to look for ways to circumvent the rules rather than trying to provide useful information.

28

According to the IASB, what is needed for international accounting standards to work effectively?
A) Commitment from auditors to resist client pressures
B) Professional judgment in the public interest on the part of management
C) Financial statement preparers must produce reports that faithfully represent all transactions
D) All of the above are conditions for effective standards.

D) All of the above are conditions for effective standards.

29

Which of the following statements is true about the IASB's approach to accounting standard setting?
A) The IASB approach is very similar to the rules-oriented basis favored by the FASB in the United States.
B) The IASB uses a principles-based approach to standards formulation.
C) The IASB pronouncements have been called a “cookbook” of accounting standards.
D) The Sarbanes-Oxley Act requires the FASB to move toward the approach for standard setting used by the IASB.

B) The IASB uses a principles-based approach to standards formulation.

30

The IASB's Framework for Preparation and Presentation of Financial Statements (1989) establishes:
A) the required practices that should be followed by accountants in preparing financial statements.
B) the structure, content, and format of financial statements.
C) sanctions for failure to comply with the IASB standards.
D) the concepts to be used in formulating international accounting standards.

D) the concepts to be used in formulating international accounting standards.

31

The IASB's Framework for Preparation and Presentation of Financial Statements (1989) implies that the most important group of users is:
A) government.
B) general public.
C) creditors.
D) investors.

D) investors.

32

According to the Framework for Preparation and Presentation of Financial Statements of the IASB, which of the following is NOT required for asset recognition?
A) Control of the resource
B) Ownership of the resource
C) Future economic benefits
D) Reliable measurement of the cost or value of the resource

B) Ownership of the resource

33

According to the Framework for Preparation and Presentation of Financial Statements of the IASB, what is the definition of income?
A) Assets minus liabilities
B) Revenue minus expenses
C) Increase in equity (other than from contributions by owners)
D) Inflow of resources with future economic benefit

C) Increase in equity (other than from contributions by owners)

34

In November 2007 which organization removed the requirement that foreign private issuers reconcile their financial statements to U.S. GAAP?
A) IASB
B) EU
C) SEC
D) FASB

C) SEC

35

Which of the following is NOT a way in which a country might adopt IFRS?
A) All companies in that country adopt IFRS.
B) Foreign companies listed on domestic exchanges adopt IFRS.
C) IASB forces them to adopt IFRS.
D) Domestic companies that list on foreign exchanges adopt IFRS.

C) IASB forces them to adopt IFRS.

36

What was the 2002 finding by the six largest public accounting firms regarding International Financial Reporting Standards?
A) Of the countries surveyed, almost all planned to make their GAAP converge with IFRS.
B) Very few of the countries studied planned to move their national accounting standards toward convergence with IFRS.
C) There were almost as many convergence strategies as there were countries in the study.
D) The countries that planned to make their GAAP converge with IFRS were predominantly western European nations.

A) Of the countries surveyed, almost all planned to make their GAAP converge with IFRS.

37

In the 2002 study by the world's six largest public accounting firms concerning convergence with IFRS, what was the most frequently cited concern about convergence?
A) Language translation difficulties
B) Lack of perceived benefit of using IFRS
C) Complexity of specific IFRS
D) Preference for national standards

C) Complexity of specific IFRS

38

What is the official language of the IASB?
A) English
B) French
C) Spanish
D) German

A) English

39

What language is used to develop the International Financial Reporting Standards (IFRS)?
A) French
B) German
C) English
D) Spanish

C) English

40

What group is responsible for translating International Financial Reporting Standards into languages other than the official language of the IASB?
A) The International Accounting Standards Board
B) The International Accounting Standards Committee Foundation
C) The United Nations
D) The national accountancy bodies of individual countries

D) The national accountancy bodies of individual countries

41

The International Financial Reporting Standards (IFRS) have been translated into how many languages?
A) None. They are only written in the official language of the IASB.
B) More than 30
C) More than 100
D) Six (6): Chinese, English, German, Japanese, Russian, and Spanish

B) More than 30

42

What was the “Norwalk Agreement?”
A) A pledge between the Financial Accounting Standards Board in the U.S. and the IASB to make their reporting standards compatible
B) A concession by the Financial Accounting Standards Board in the U.S. to adopt IFRS as soon as possible
C) It is a treaty between the United States and the European Union to make their accounting standards converge.
D) It was an agreement signed in Norwalk, Connecticut in 2002 to make English the official language of the IASB.

A) A pledge between the Financial Accounting Standards Board in the U.S. and the IASB to make their reporting standards compatible

43

According to the Norwalk Agreement, the FASB will monitor:
A) all IASB projects.
B) only those projects where they have a level of interest in the topic.
C) no IASB projects, since the IASB is capable of self-monitoring.
D) only those projects dealing with internationally complex issues.

B) only those projects where they have a level of interest in the topic.

44

What is the role of the liaison members of the International Accounting Standards Board?
A) To facilitate information exchange and cooperation between the FASB and the IASB
B) To eliminate the political influences on the IASB and national accounting bodies
C) To enforce adherence to the fundamental principles of the IASB
D) All of the above

A) To facilitate information exchange and cooperation between the FASB and the IASB

45

Which of the following is not a major concern related to convergence of international accounting standards?
A) The complicated nature of particular standards
B) The tax-driven nature of the national accounting regime
C) An overload of guidance on the first-time application of IFRS
D) IFRS language translation difficulties

C) An overload of guidance on the first-time application of IFRS

46

What is the intent of IFRS 1?
A) To establish the guidelines for financial statement presentation
B) Provide the working definitions of accounting elements
C) It gives guidance to first-time adopters of IFRS issued by the IASB.
D) To provide the framework for setting international accounting standards

C) It gives guidance to first-time adopters of IFRS issued by the IASB.

47

What is the primary focus of IAS 1?
A) To establish the guidelines for financial statement presentation
B) Provide guidance to first-time adopters of IFRS issued by the IASB
C) Establish the framework that is to guide the IASB in setting accounting standards
D) None of the above.

A) To establish the guidelines for financial statement presentation

48

What is Anglo-American Accounting?
A) It is an association of British and American accounting regulatory agencies.
B) The accounting systems used in the U.S., U.K., and other English-speaking countries
C) This refers to the basis used by the IASB to judge the appropriateness of international accounting standards.
D) All of the above are true.

B) The accounting systems used in the U.S., U.K., and other English-speaking countries

49

Which of the following statements is NOT true about Anglo-American Accounting?
A) There is a strong reliance on professional judgment.
B) Financial reporting focuses on the firm with an investor orientation.
C) There is a strong emphasis on measurement of taxable income.
D) Audits report on the adherence to the principle of fair presentation.

C) There is a strong emphasis on measurement of taxable income.

50

Which of the following statements is NOT true about Anglo-American Accounting?
A) There is a strong reliance on professional judgment.
B) There is agreement on the interpretation of the principle of fair presentation.
C) There is a stronger emphasis on substance of reports rather than the form of reports
D) Audits report on the adherence to the principle of fair presentation.

B) There is agreement on the interpretation of the principle of fair presentation.

51

Which of the following is a difference among the U.S. and other Anglo-American countries in terms of accounting standards?
A) The U.S. does not adhere to the “true and fair view” approach.
B) The U.S. is more private-sector oriented.
C) The U.S. always follows a conceptual framework when developing accounting standards.
D) U.S. standards are becoming more rigid than U.K. standards.

D) U.S. standards are becoming more rigid than U.K. standards.

52

Which of the following terms describe the qualitative characteristic of information usefulness?
A) Relevance
B) Understandability
C) Representational faithfulness
D) All of the above are characteristics of information usefulness.

D) All of the above are characteristics of information usefulness.

53

In which of the following countries is the use of IFRS not allowed for domestic companies listed on its stock exchanges?
A) United Kingdom
B) Yugoslavia
C) Australia
D) United States

D) United States