1. Which of the following statements best describes the IFRS conceptual framework?
A. It provides a set of rules for accountants to follow.
B. It provides concepts, since accounting is based on nature of law.
C. It helps equity investors interpret the earnings per share.
D. It provides a basis for preparing and presenting financial statements.
2. Financial information is relevant for all of the following reasons
except:
A. for making predictions about the future cash flows
B. for making comparisons with industry data.
C. to determine the liquidation values of capital assets
D. for confirming or correcting past evaluations.
3. The use of a company's financial statements to assess a new share offering would rely most heavily on which of the following characteristics of information?
A. Verifiability
B. Relevance
C. Going concern assumption
D. Unit of measure assumption
4. Which of the following is an objective of general purpose financial reporting?
A. To provide information about an entity's economic resources, obligations, and equity/net assets.
B. To provide information that is helpful to investors, creditors and other users in making resource allocation decisions and/or assessing management stewardship.
C. To provide information that is useful in assessing the economic performance of the entity.
D. All of these are objectives of financial reporting.
5. Financial information does not demonstrate comparability when:
A. companies in the same industry use different accounting policies to account for the same type of transaction.
B. one company changes its estimate of the residual value of a fixed asset while the other company does not change it.
C. one company fails to adjust its financial statements for changes in the fair value of short term investments, while the other company makes the adjustment.
D. both companies use different suppliers.
6. The transition to International Financial Reporting Standards can be seen as enhancing which of the following qualitative characteristics?
A. Verifiability
B. Comparability
C. Understandability
D. Timeliness
7. Anvilles Inc. manufactures metal sheets for construction. Mr. Anvilles, the sole shareholder, arranges to transport two hundred metal sheets to the family cottage in Mont Orford. He tells the bookkeeper to record the cost of the metal sheets as cost of goods sold.
Which of the following qualitative characteristics of accounting information has
not
been respected?
A. Both verifiability and the entity concept
B. Both the unit of measure assumption and faithful representation
C. Both faithful representation and the entity concept
D. Both relevance and the unit of measure assumption
8. Mr. Switch, a local business man, owns two different businesses—a lumber sawmill and a restaurant. The price of lumber has declined and therefore sawmill is in financial difficulty. However, the restaurant is thriving, and Mr. Switch would like to start paying two of the sawmill employees under the restaurant's payroll. His accountant explains that this is
not
in accordance with certain basic principles in accounting. Which principle is he referring to?
A. Full disclosure
B. Periodic-reporting assumption
C. Entity concept
D. Unit-of-measure assumption
9. One drawback to the unit-of-measure assumption is:
A. it inhibits an assessment of going concern.
B. information about individual items being measured is lost.
C. it makes it easier to measure certain assets, such as intellectual property, human capital, and social costs.
D. it makes it harder to measure transactions.
10. The assumption that a business enterprise will not be sold or liquidated in the near future is known as the:
A. entity concept.
B. unit-of-measure assumption.
C. going-concern assumption.
D. periodic-reporting assumption.