Financial Reporting for business entities

Question 1

Articulation means that financial statements are:

Answer 1

fundamentally interrelated.

Question 2

According to the FASB conceptual framework, comprehensive income includes which of the following?

A.
Loss on discontinued operations

B.
Investment by owners

C.
Both loss on discontinued operations and investment by owners
D.
Neither loss on discontinued operations nor investment by owners

Answer 2

Loss on discontinued operations

HINT:
THINK ON TIDE N OC

Operating
Non operating
Taxes
Interest
Discontinued Operation
Extraordinary gain/loss
Net Income
Other Comp Inc
Comp Income

Question 3

The basic accounting principle that states that the economic activity that underlies financial statements must be substantive in fact and presented without bias is the principle of:

Answer 3

The basic accounting principle that states that the economic activity that underlies financial statements must be substantive in fact and presented without bias is the principle of objectivity.

Question 4

Which of the following characteristics of accounting information primarily allows users of financial statements to generate predictions about an organization?

Answer 4

The qualitative characteristics of useful accounting information are found in SFAC 8, chapter 3. The primary qualitative characteristics are relevance and faithful representation. Relevance to the users of financial information means that the information is capable of making a difference when the user is making a financial decision. The characteristics that have the potential to make a difference are:
•predictive value,
•confirmatory value, and
•materiality.

Question 5

According to the FASB conceptual framework, the quality of information that helps users increase the likelihood of correctly forecasting the outcome of past or present events is called:

Answer 5

defines predictive value as follows: “Financial information has predictive value if it can be used as an input to processes employed by users to predict future outcomes. Financial information need not be a prediction or forecast to have predictive value.”

Question 6

According to the FASB’s conceptual framework, asset valuation accounts are:

A.
assets.

B.
neither assets nor liabilities.

C.
part of stockholders’ equity.

D.
liabilities.

Answer 6

A valuation account is neither an asset nor a liability. The elements of the financial statements such as assets and liabilities are described in SFAC 6. Valuation accounts are discussed in paragraph 6.34:

Question 7

What are the Statements of Financial Accounting Concepts intended to establish?

Answer 7

The objectives and fundamental concepts that will be the basis for development of financial accounting and reporting guidance.

Question 8

Materiality and relevance are both defined by:

A.
what influences or makes a difference to a decision maker.

B.
quantitative criteria set by the Financial Accounting Standards Board.

C.
the consistency in the application of methods over time.

D.
the perceived benefits to be denied that exceed the perceived costs associated with it.

You

Answer 8

what influences or makes a difference to a decision maker.

Question 9

According to the FASB’s conceptual framework, the objectives of financial reporting for business enterprises are based on:

Answer 9

the needs of the users of the information.

Question 10

With respect to the objective of general purpose financial reporting, what are U.S. GAAP and IFRS differences?

A.
The objective for GAAP is more precise and longer than the objective for IFRS.

B.
The objective for IFRS is more precise and longer than the objective for U.S. GAAP.

C.
With the issuance of SFAC 8, chapter 1, U.S. GAAP and IFRS have the same “Objective of General Purpose Financial Reporting.”

D.
FASB and IASB are working toward convergence of the objective.

Answer 10

With the issuance of SFAC 8, chapter 1, U.S. GAAP and IFRS have the same “Objective of General Purpose Financial Reporting.”