Question 1

Which of the following is NOT an objective of financial reporting?

Accepted Answer

A)  to provide information about an entity's economic resources, obligations, and equity/net assets 
B)  to provide information that is useful to investors and 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)  to provide the most useful information possible even if the costs exceed the benefits 
A)  to provide information about an entity's economic resources, obligations, and equity/net assets 
B)  to provide information that is useful to investors and 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)  to provide the most useful information possible even if the costs exceed the benefits

Question 2

Which of the following does NOT represent an essential characteristic of an asset?

Accepted Answer

A)  They represent a present economic resource. 
B)  The entity is able to transfer the economic benefit if it so chooses. 
C)  The entity has control over the resource. 
D)  The resource results from a past transaction or event. 
A)  They represent a present economic resource. 
B)  The entity is able to transfer the economic benefit if it so chooses. 
C)  The entity has control over the resource. 
D)  The resource results from a past transaction or event.

Question 3

During a major renovation project of its head office, a worker was seriously injured. While the company believes that it was not at fault, it does include the incident in the notes to its financial statements. This is consistent with the

Accepted Answer

A)  full disclosure principle. 
B)  periodicity assumption. 
C)  going concern assumption. 
D)  economic entity assumption. 
A)  full disclosure principle. 
B)  periodicity assumption. 
C)  going concern assumption. 
D)  economic entity assumption.

Question 4

Conceptual framework
Briefly describe the objectives of a soundly developed conceptual framework.

Accepted Answer

A soundly developed conceptual framework

Question 5

Fraudulent financial reporting and the accountant's role
Explain what the accountant's responsibility is in preparation of a company's financial records.

Accepted Answer

The accountant's role is to capture busi

Question 6

Which of the following is true about understandability as a qualitative characteristic of financial statements?

Accepted Answer

A)  The onus to prepare understandable statements and to be able to understand them lies with the preparer. 
B)  Where the underlying transactions or economic events are more complex, the user is expected to understand them without the assistance of an advisor. 
C)  The onus to prepare understandable statements and to be able to understand them lies with the preparer and the user. 
D)  Users with no knowledge of business and financial accounting matters are expected to understand the financial statements. 
A)  The onus to prepare understandable statements and to be able to understand them lies with the preparer. 
B)  Where the underlying transactions or economic events are more complex, the user is expected to understand them without the assistance of an advisor. 
C)  The onus to prepare understandable statements and to be able to understand them lies with the preparer and the user. 
D)  Users with no knowledge of business and financial accounting matters are expected to understand the financial statements.

Question 7

The concept of materiality is extremely important to the process of financial statement preparation and audit. Briefly explain the benchmarking approach to arriving at a materiality figure. What other factors might be considered in deciding whether an item is material?

Accepted Answer

Current auditing standards (CAS 320.A7)

Question 8

Fair value measurement
The ongoing trend toward using fair value has both its supporters and its critics. Briefly explain arguments in favour of and against the use of fair value.

Accepted Answer

Arguments in favour:
Fair values are cur

Question 9

Comparability allows any financial statement user to

Accepted Answer

A)  make timely decisions. 
B)  understand all the information presented. 
C)  verify all the data provided. 
D)  identify the real similarities and differences in economic phenomena. 
A)  make timely decisions. 
B)  understand all the information presented. 
C)  verify all the data provided. 
D)  identify the real similarities and differences in economic phenomena.

Question 10

Going concern assumption
The going concern assumption applies in most, but not all, business situations. When would it not apply?

Accepted Answer

The only time when the assumption would

Question 11

IFRS/ASPE revenue recognition differences
Distinguish between the IFRS balance sheet approach and the ASPE income statement approach to revenue recognition.

Accepted Answer

Revenue has generally been recognized wh

Question 12

New 1 Uncertainty trade-off
Explain the trade-off related to uncertainty.

Accepted Answer

Too much uncertainty (existence, outcome

Question 13

Identification of foundational accounting principles
State the accounting principle or assumption that is most applicable in the following situations:
1. A company prepares consolidated financial statements for a subsidiary that it owns.
2. The decision to remove an asset from the balance sheet
3. A large sale on account is not recognized as revenue because collectibility is an issue.
4. Disclosure of the liability from a lawsuit in the financial statements
5. Preparation of monthly financial statements
6. Using the Canadian dollar in financial statements
7. An energy company includes detailed information about its reserves in its notes to the financial statements.

Accepted Answer

1. Control or economic entity assumption

Question 14

Under ASPE, when deciding whether to recognize a financial statement element (or not), and how to measure it, the accountant should

Accepted Answer

A)  always use estimates. 
B)  record "hard" numbers and ignore "soft" numbers. 
C)  determine an acceptable level of uncertainty. 
D)  recognize a financial statement element even if it cannot be measured. 
A)  always use estimates. 
B)  record "hard" numbers and ignore "soft" numbers. 
C)  determine an acceptable level of uncertainty. 
D)  recognize a financial statement element even if it cannot be measured.

Question 15

Under IFRS, "other comprehensive income" does NOT include

Accepted Answer

A)  unrealized holding gains and losses on certain securities. 
B)  gains and losses on disposal of property, plant, and equipment. 
C)  gains and losses related to certain types of hedges. 
D)  certain gains and losses related to foreign exchange transactions. 
A)  unrealized holding gains and losses on certain securities. 
B)  gains and losses on disposal of property, plant, and equipment. 
C)  gains and losses related to certain types of hedges. 
D)  certain gains and losses related to foreign exchange transactions.

Question 16

Which of the following is NOT a component of a conceptual framework for financial reporting?

Accepted Answer

A)  accounting's goals and purposes 
B)  qualitative characteristics of accounting information 
C)  foundational principles 
D)  All of the above are components of a conceptual framework. 
A)  accounting's goals and purposes 
B)  qualitative characteristics of accounting information 
C)  foundational principles 
D)  All of the above are components of a conceptual framework.

Question 17

Identification of foundational accounting principles and qualitative characteristics Presented below are a number of accounting procedures and practices followed by January Corp. For each of these items, list the assumption, principle, or qualitative characteristic that is NOT being followed.
1. Because the company's income is low this year, January switched from accelerated depreciation to straight-line depreciation.
2. The president of January believes it is foolish to report financial information on a yearly basis. She believes that financial information should be disclosed only when significant new information is available related to the company's operations.
3. January decides to establish a large loss and related liability this year because of the possibility that it may lose a pending lawsuit. The possibility of loss is considered remote by the corporation's lawyers.
4. One of the corporation's executives purchased a new home computer for personal use with company money, charging Miscellaneous Expense.
5. The corporation has not established an Allowance for Doubtful Accounts, even though there are a significant number of their accounts that are either slow paying or may not pay their debts in full.

Accepted Answer

1. Representational Faithfulne

Question 18

A local businessman owns several different companies. His accountant prepares separate financial statements for each of these businesses. This is an application of the

Accepted Answer

A)  full disclosure principle. 
B)  periodicity assumption. 
C)  going concern assumption. 
D)  economic entity assumption. 
A)  full disclosure principle. 
B)  periodicity assumption. 
C)  going concern assumption. 
D)  economic entity assumption.

Question 19

Which of the following situations does NOT demonstrate an attempt at financial engineering?

Accepted Answer

A)  creating complex legal arrangements and financial instruments 
B)  structuring debt financing so that it meets the GAAP definition of equity rather than debt 
C)  accounting for bona fide business transactions in a transparent manner 
D)  aggressively interpreting GAAP so that the impact on critical ratios is minimized 
A)  creating complex legal arrangements and financial instruments 
B)  structuring debt financing so that it meets the GAAP definition of equity rather than debt 
C)  accounting for bona fide business transactions in a transparent manner 
D)  aggressively interpreting GAAP so that the impact on critical ratios is minimized

Question 20

Generally, under ASPE, revenue from sales should be recognized at a point when

Accepted Answer

A)  management decides it is appropriate to do so. 
B)  the product is available for sale. 
C)  an exchange has taken place and the earnings process is substantially complete. 
D)  the entire amount receivable has been collected from the customer and there remains no further warranty liability. 
A)  management decides it is appropriate to do so. 
B)  the product is available for sale. 
C)  an exchange has taken place and the earnings process is substantially complete. 
D)  the entire amount receivable has been collected from the customer and there remains no further warranty liability.

Which of the following is NOT an objective of financial reporting?

Which of the following does NOT represent an essential characteristic of an asset?

During a major renovation project of its head office, a worker was seriously injured. While the company believes that it was not at fault, it does include the incident in the notes to its financial statements. This is consistent with the

Conceptual framework Briefly describe the objectives of a soundly developed conceptual framework.

Fraudulent financial reporting and the accountant's role Explain what the accountant's responsibility is in preparation of a company's financial records.

Which of the following is true about understandability as a qualitative characteristic of financial statements?

The concept of materiality is extremely important to the process of financial statement preparation and audit. Briefly explain the benchmarking approach to arriving at a materiality figure. What other factors might be considered in deciding whether an item is material?

Fair value measurement The ongoing trend toward using fair value has both its supporters and its critics. Briefly explain arguments in favour of and against the use of fair value.

Comparability allows any financial statement user to

Going concern assumption The going concern assumption applies in most, but not all, business situations. When would it not apply?

IFRS/ASPE revenue recognition differences Distinguish between the IFRS balance sheet approach and the ASPE income statement approach to revenue recognition.

New 1 Uncertainty trade-off Explain the trade-off related to uncertainty.

Under ASPE, when deciding whether to recognize a financial statement element (or not), and how to measure it, the accountant should

Under IFRS, "other comprehensive income" does NOT include

Which of the following is NOT a component of a conceptual framework for financial reporting?

A local businessman owns several different companies. His accountant prepares separate financial statements for each of these businesses. This is an application of the

Which of the following situations does NOT demonstrate an attempt at financial engineering?

Generally, under ASPE, revenue from sales should be recognized at a point when

The Canadian Financial Reporting Environment

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters

Exam 2: Conceptual Framework Underlying Financial Reporting

Which of the following is NOT an objective of financial reporting?

Which of the following does NOT represent an essential characteristic of an asset?

During a major renovation project of its head office, a worker was seriously injured. While the company believes that it was not at fault, it does include the incident in the notes to its financial statements. This is consistent with the

Conceptual framework Briefly describe the objectives of a soundly developed conceptual framework.

Fraudulent financial reporting and the accountant's role Explain what the accountant's responsibility is in preparation of a company's financial records.

Which of the following is true about understandability as a qualitative characteristic of financial statements?

The concept of materiality is extremely important to the process of financial statement preparation and audit. Briefly explain the benchmarking approach to arriving at a materiality figure. What other factors might be considered in deciding whether an item is material?

Fair value measurement The ongoing trend toward using fair value has both its supporters and its critics. Briefly explain arguments in favour of and against the use of fair value.

Comparability allows any financial statement user to

Going concern assumption The going concern assumption applies in most, but not all, business situations. When would it not apply?

IFRS/ASPE revenue recognition differences Distinguish between the IFRS balance sheet approach and the ASPE income statement approach to revenue recognition.

New 1 Uncertainty trade-off Explain the trade-off related to uncertainty.

Under ASPE, when deciding whether to recognize a financial statement element (or not), and how to measure it, the accountant should

Under IFRS, "other comprehensive income" does NOT include

Which of the following is NOT a component of a conceptual framework for financial reporting?

A local businessman owns several different companies. His accountant prepares separate financial statements for each of these businesses. This is an application of the

Which of the following situations does NOT demonstrate an attempt at financial engineering?

Generally, under ASPE, revenue from sales should be recognized at a point when

The Canadian Financial Reporting Environment

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters