FAR 4 - IASB and US SEC Flashcards Preview

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Flashcards in FAR 4 - IASB and US SEC Deck (33):
1

T/F: Even though the SEC delegates the creation of accounting standards to the private sector, the SEC frequently comments on accounting and auditing issues. The two main pronouncements published by the SEC are: Financial Reporting Regulations (FRR) and the Staff Auditing Bulletins (SAB).

False.
The main pronouncements published by the SEC are the Financial Reporting Releases (FRR) and the Staff Accounting Bulletins (SAB).

2

What are the four divisions of the SEC?

Division of Corporate Finance, Division of Enforcement, Division of Trading and Markets, Division of Investment Management.

3

Which Division of the SEC oversees the compliance with the securities acts and examines all filings made by publicly held companies?

The Division of Corporate Finance

4

Which Division of the SEC completes the investigation and takes appropriate actions when there is a violation of a securities law (except the Public Utility Holding Company Act). Then makes recommendations to the Justice Department concerning any punishments or potential criminal prosecution?

The Division of Enforcement

5

Which Division of the SEC oversees the secondary markets, exchanges, brokers, and dealers?

The Division of Trading and Markets

6

Which Division of the SEC oversees the investment advisers and investment companies under the Investment Company Act of 1940 and the Investment Advisers Act of 1940?

The Division of Investment Management

7

The SEC enforces the corporate registration requirements of the Securities Act of 1933 as one of its principal objectives. These requirements are intended to provide info that enables the SEC to:
A. Evaluate the financial merits of the corporation offering the securities to the public.
B. Ensure that investors are provided with adequate information on which to base investment decisions.
C. Guarantee that the facts contained in the registration statement are accurate.
D. Assure investors of the accuracy of the financial statements.

B. The mission of the SEC is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. In order to carry out the mandates in the Securities Act of 1933, the SEC is ensuring that investors are provided with adequate information on which to base investment decisions. www.SEC.gov, What We Do.

8

T/F: The SEC is not a member of the International Organization of Securities Commissions (IOSCO).

False
The SEC is a member of the IOSCO, which consists of more than 100 securities regulatory agencies or exchanges across the globe.

9

A company is an accelerated filer that is required to file Form 10-K with the United States Securities and Exchange Commission (SEC). What is the maximum number of days after the company's fiscal year end that the company has to file Form 10-K with the SEC?

75 days
An accelerated filer has an aggregate worldwide market value of the voting and nonvoting common stock held by nonaffiliates of $75 million or more, but less than $700 million on the last business day of the issuer's most recently completed second fiscal quarter. A large accelerated filer has market capitalization (as described) of $700 million or more. Beginning in 2006 the SEC changed the 10-K filing deadline for large accelerated filers to be 60 days from the fiscal year end. Accelerated filers still have 75 days to file their 10-K.

10

Which of the following is not a required component of the 10-K filing?
A. Product market share.
B. Description of the business.
C. Market price of common stock.
D. Executive compensation.

A. The market share of the company's product is not a required disclosure. The company may chose to voluntarily present this information, but it is not a required disclosure.

11

Which regulation governs the form and content of financial statement disclosures?
A. Regulation S-X.
B. Sarbanes Oxley.
C. Regulation S-K.
D. Regulation S-Q.

A. Regulation S-X governs the form and content of financial statements and financial statement disclosures.

12

Which regulation enhances corporate governance to mitigate financial accounting abuses?
A. Regulation S-X.
B. Sarbanes Oxley.
C. Regulation S-K.
D. Regulation S-Q.

B. The Sarbanes-Oxley Act of 2002 (SOX) contains provisions to enhance corporate governance and to mitigate financial accounting abuses.

13

Which regulation governs the form and content of non-financial statement disclosures?
A. Regulation S-X.
B. Sarbanes Oxley.
C. Regulation S-K.
D. Regulation S-Q.

C. Regulation S-K governs the form and content of nonfinancial statement disclosures. These disclosures are the content of the 10-K outside of the financial statements (remember that "S-K" governs the "10-K" nonfinancial statement content).

14

A company that is a large accelerated filer must file its Form 10-Q with the United States Securities and Exchange Commission within how many days after the end of the period?

40 days
A large accelerated filer is a company with worldwide market value of outstanding voting and nonvoting common equity held by nonaffiliates of $700 million or more. A large accelerated filer must file its 10Q within 40 days after quarter end.
A non-accelerated filer must file its 10Q within 45 days after quarter end.

15

T/F: Initial registration of securities is typically done via Form S-1.

True

16

T/F: 2 years balance sheets, 3 years income statement, statements of cash flows, and shareholders' equity are the audited financial statements provided upon initial registration of a security.

True

17

T/F: Audited financial information is included in Part II, Item 8 of Form 10-k.

True

18

Which of the following is a member of the Monitoring Board?
A. Global Accounting Technical Officer of the World Bank.
B. CEO of the Financial Executives International.
C. Chair of the CFA Institute.
D. Chair of the U.S. Securities and Exchange Commission

D. The Chair of the U.S. Securities and Exchange Commission is a member of the Monitoring Board. The Monitoring Board provides a formal link between the Trustees and public authorities. The U.S. Securities and Exchange Commission is the primary overseer and regulator of the U.S. securities markets. Its mission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.

19

The IFRS Foundation serves as the administrative umbrella for a group of bodies. Which of the following bodies are NOT included under the IFRS Foundation umbrella?
A. International Federation of Accountants (IFAC).
B. International Accounting Standards Board.
C. IFRS Interpretations Committee.
D. IFRS Advisory Council.

A. The International Federation of Accountants (IFAC) is a global organization for the accounting profession. Its members are accounting and auditing organizations throughout the world. It is an independent organization not under the IFRS Foundation umbrella, but it does support the activities of the IFRS Foundation by encouraging high-quality practices by the world's accountants and auditors.

20

Which of the following is an objective of the IFRS Foundation?
A. To enforce the use and rigorous application of those standards.
B. To take account of, as appropriate, the needs of a range of sizes and types of entities in diverse economic settings.
C. To develop, in the public interest, a single set of high-quality, understandable, enforceable, and globally accepted financial-reporting standards (IFRSs) through its member associations.
D. To require adoption of international financial reporting standards (IFRSs) globally.

B.
Objectives of the IFRS Foundation from its Constitution:
1. To develop, in the public interest, a single set of high-quality, understandable, enforceable, and globally accepted financial-reporting standards based upon clearly articulated principles.
2. To promote the use and rigorous application of those standards.
3. To take account of, as appropriate, the needs of a range of sizes and types of entities in diverse economic settings.
4. To promote and facilitate adoption of international financial reporting standards (IFRSs) globally.

21

T/F: The IFRS Foundation is the parent to the IASB.

True

22

T/F: The IASB Board members are elected into their positions.

False
The Monitoring Board is composed of public capital market authorities, such as the Chair of the SEC and IOSCO. Responsibilities include participating in the process for appointing Trustees and approving the appointments of Trustees. The Trustees appoint the members of IASB, IFRS Advisory Council, and IFRS Advisory Council.

23

T/F: International Standards Committee (IASC) was the organization that was the predecessor to the IASB

True

24

T/F: A Small and Medium-sized (SME) company can apply the IFRS SME standards and be publicly traded.

False
SME company's are those that are not publicly traded. These standards cover all reporting areas and is designed to simplify the financial reporting process for SMEs.

25

Which of the following best describes the term "public accountability" according to IFRSs and IFRS for SME?
I. Entity files, or is in the process of filing, its financial statements with a securities commission or other regulatory organization for the purpose of issuing any class of instruments in a public market.
II. Entity holds assets in a fiduciary capacity for a broad group of outsiders, such as a bank, insurance entity, securities broker/dealer, pension fund, mutual fund, or investment banking entity.

Both statements are included in the definition of the term "public accountability." The entity files, or is in the process of filing, its financial statements with a securities commission or other regulatory organization for the purpose of issuing any class of instruments in a public market, and the entity holds assets in a fiduciary capacity for a broad group of outsiders, such as a bank, insurance entity, securities broker/dealer, pension fund, mutual fund, or investment-banking entity. IFRS for SMEs, para. 1.3.

26


According to the IFRS for Small and Medium-sized Entities (IFRS for SMEs), the intended user is an SME. Which of the following, if any, is (are) included in the definition of that user?
I. An entity that does not have public accountability.
II. An entity that publishes general purpose financial statements for external users.

Both I and II. The IASB uses a broad definition of an SME. Rather than restrict it by revenue or number of employees, as other organizations, such as the World Bank and U.S. government, have done; the Board simply states that the entity does not have public accountability and that the entity publishes general purpose financial statements for external users, such as owners who are not involved in managing the business, existing and potential creditors, and credit rating agencies. IFRS for SME, para. 1.2.

27

IAS 8, Accounting Policies, Changes in Accounting Estimates, and Errors includes the IFRS hierarchy. What is the second-level, or the level after the initial level, addressing the requirements and guidance in IFRS?
A. The definitions, recognition criteria, and measurement concepts for assets, liabilities, comprehensive income, revenue, expenses, and gains and losses in the Framework.
B. The definitions, recognition criteria, and measurement concepts for assets, liabilities, revenue, and expenses in the Framework.
C. Pronouncements of other standard-setting bodies, other accounting literature, and accepted industry practices.
D. Pronouncements of other standard setting bodies using a similar conceptual framework, other accounting literature, and accepted industry practices.

B.
The IFRS hierarchy, as presented in IAS 8, includes first, the requirements in IFRS dealings with similar or related issues; second, the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework; and lastly, the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature, and accepted industry practices, to the extent that these do not conflict with IFRS or the Framework. IAS 8, para. 12.

28

How is an asset defined by the IASB's Framework?

According to the IASB's Framework, an asset is defined as "a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity." IASB Framework, para. 49.

29

T/F: Under the IASB Framework, the following assumptions underlie the preparation and presentation of the FS: Accrual basis and Going concern.

True

30

T/F: The IASB has the right to enforce all regulations, accounting standards and procedures.

False. The IASB has no enforcement authority.

31

What are the two fundamental (primary) qualitative characteristics of useful financial information included in IASB's Framework?

Relevance and faithful representation are the two fundamental qualitative characteristics of financial information (IASB Framework 5-18).

32

T/F: The IASB Framework treats expenses and losses as an expense, where the U.S. Framework treats expenses and losses as separate elements.

True

33

T/F: The IASB Framework and US Framework identifies accrual accounting as a basic assumption.

False
IASB = true
US = false, (OCBOA)

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