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Question 1

The principal benefit of a single set of global financial reporting standards is

Answer 1

The principal advantage of a single set of global financial reporting standards is that multinational companies do not have to rewrite their statements in (or perform a complex reconciliation to) the local financial reporting framework to trade their stock on the local exchange. Foreign investment is thereby made much easier, and the cost of capital is lowered.

Question 2

The information provided by financial reporting pertains to

Answer 2

Financial reporting pertains essentially to individual economic entities. Information about industries and economies in which an industry operates is usually provided only to the extent necessary for understanding the individual business enterprise.

Question 3

A preliminary prospectus, permitted under SEC Regulations, is known as the

Answer 3

To comply with the 1933 act, an issuer of securities must prepare a registration statement and a prospectus. A preliminary prospectus is called a red-herring prospectus because of the required red legend identifying it as preliminary. It contains most of the information to be included in the final prospectus. It can be distributed to potential purchasers during the 20-day waiting period.

Question 4

The reporting model described in the guidance on not-for-profit financial statements applies

Answer 4

The reporting model for financial accounting and reporting by nongovernmental not-for-profit entities (NFPs) recognizes that the information needs of resource providers of NFPs differ from those of resource providers of business entities. The first set of resource providers are primarily concerned about financial return, but the second set of resource providers are primarily concerned about the services rendered by the NFP and its continuing ability to render those services.

Question 5

The FASB’s conceptual framework explains both financial and physical capital maintenance concepts. Which capital maintenance concept is applied to currently reported net income, and which is applied to comprehensive income?

Answer 5

The financial capital maintenance concept is the basis of (1) traditional financial statements (including net income) and (2) the full set of financial statements (including comprehensive income), discussed in the conceptual framework. Under this concept, a return on investment (defined in terms of financial capital) results only if the financial amount of net assets at the end of the period exceeds the amount at the beginning after excluding the effects of transactions with owners. Under a physical capital concept, a return on investment (in terms of physical capital) results only if the physical productive capacity (or the resources needed to achieve that capacity) at the end of the period exceeds the capacity at the beginning after excluding the effects of transactions with owners. The physical capital concept requires many assets to be measured at current (replacement) cost.

Question 6

According to the FASB’s conceptual framework, recognition is the process of formally incorporating an element into the financial statements of an entity. Recognition criteria include all of the following

Answer 6

An item and information about the item should be recognized when the following four fundamental recognition criteria are met: (1) The item meets the definition of an element of financial statements; (2) it has a relevant attribute measurable with sufficient reliability; (3) the information about the item is capable of making a difference in user decisions; and (4) the information is representationally faithful, verifiable, and neutral. Decision usefulness is a user-specific quality of accounting information.

Question 7

A Midwestern public utility reports noncurrent assets as the first item on its statement of financial position. This practice is an example of the

Answer 7

Assets are normally listed in the order of their importance, with current assets typically being the most important. For a public utility, the physical plant is the most important asset. Thus, public utilities often report their noncurrent assets as the first item on the balance sheet. This departure from the customary presentation in accordance with GAAP is justified by the unique operating characteristics of the industry.

Question 8

what is the financial assumption?

Answer 8

1- economic entity
2- Going concern
3- monetary
4-periodically

Question 9

what is the economic entity?

Answer 9

reporting entity is seperatlly identified for economic and financial accountability

Question 10

what is the financial principales?

Answer 10

1- revenue recognition
2- matching principle
3- historical cost
4- full discloure

Question 11

notes and supplementary information provide the financial statement with

Answer 11

amounts

Question 12

what is the qualitative characteristic

Answer 12

two basic
1- Relevance.
- predictive
- confirm
2- Faithfulness
- complete
- free from errors
- neutral

Question 13

what is the enhance the qualitative characteristic?

Answer 13

1- compatibility
2- verifiable
3- timeliness
4- understandable

Question 14

what is the fundamental criteria?

Answer 14

1- definition
2- measurable
3- relevant
4- reliable

Question 15

Revenue and gains should be recognize when

Answer 15

1- realized : good or service has been exchange for cash or claim of cash
Or
2- realizable : good or service has been exchange for asset which is ready to convert to cash
and
3- earned:entity is ready to receive benefit

Question 16

expenses and loss are recognize when

Answer 16

1- cause and effect
2- systemic and rational
3- immediate recognation

Question 17

The GASB’s conceptual framework describes two inherent control characteristics of the governmental environment: (1) the implications of a budget as both the embodiment of policy decisions and as a legally binding control tool, and (2) the segregation of governmental functions into governmental-type activities and business-type activities.true or false

Answer 17

false
The two inherent control characteristics of the governmental environment are (1) the implications of a budget as the expression of policy decisions and as a legally binding control tool and (2) the use of fund accounting.

Question 18

The constraints on financial accounting include industry practices and conservatism.true or false

Answer 18

true

The constraints on financial accounting are cost, industry practices, and conservatism.

Question 19

Corporation A rents extra office space with a yearly lease

in this case the revenue is realized or realizable or earned or both

Answer 19

Realizable. The revenues are realizable because the office space has been made available to the tenant. However, the revenues are earned after performance has been completed. For a lease, performance by the lessor occurs proportionally throughout the year.

Question 20

Corporation A sells inventory for cash but has not delivered the goods.is the revenue realized or realizable or both

Answer 20

Realizable. The revenues are realizable because the entity has received cash for a promise to provide goods. But the revenues have not been earned because the goods have yet to be delivered.

Question 21

This concept may be misinterpreted to permit a deliberate understatement of net assets or net income.

Answer 21

Conservatism. Under the conservatism constraint, when alternative accounting methods are appropriate, the one having the less favorable effect on net income and total assets is preferable. However, conservatism does not permit a deliberate understatement of total assets and net income. Furthermore, SFAC 5 describes “a general tendency to emphasize purchase and sale transactions and to apply conservative procedures in accounting recognition.”

Question 22

The federal government use Gaas or Gaap or ?

Answer 22

The FASAB. The FASAB establishes accounting principles for the federal government.