WorksheetsDevelopment of U.S. Accounting Standards
Total questions: 102
Worksheet time: 56mins
Which of the following statements about the development of U.S. accounting standards is false?
The FASB exercises rulemaking authority delegated by the SEC.
The Financial Accounting Standards Advisory Council (FASAC) evaluates the FASB's performance.
The Financial Accounting Foundation oversees the FASB.
Pronouncements of the FASB's predecessor bodies remain in force until amended or superseded by the FASB.
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?
Currently Reported Net Income - Financial Capital. Comprehensive Income - Financial Capital
Currently Reported Net Income - Physical Capital. Comprehensive Income - Physical Capital
Currently Reported Net Income - Physical Capital. Comprehensive Income - Financial Capital
Currently Reported Net Income - Financial Capital. Comprehensive Income - Physical Capital
What type of cost is the amount of cash that would have to be paid for a current acquisition of the same or an equivalent asset?
Present value
Net realizable value (nrv)
Current (Replacement) Cost
Net settlement Value
Integral Corp. is subject to the reporting provisions of the Securities Exchange Act of 1934. For its current fiscal year, Integral filed the following with the SEC: quarterly reports, an annual report, and a periodic report listing newly appointed officers of the corporation. Integral did not notify the SEC of shareholder "short-swing" profits, did not report that a competitor made a tender offer to Integral's shareholders, and did not report changes in the price of its stock as sold on the New York Stock Exchange. Under the SEC reporting requirements, which of the following was Integral required to do?
Report the tender offer to the SEC.
Report the changes in the market price of its stock.
File the periodic report listing newly appointed officers.
Notify the SEC of shareholder "short-swing" profits
True or False - A major objection to the adoption of IFRS is that small businesses must expend resources complying with burdensome regulations designed for large corporations.
True
False
Expenses and losses have historically been subject to more stringent recognition criteria than revenues and gains.
True
False
Which of the following is ordinarily not considered one of the major distinguishing characteristics of not-for-profit entities (NFPs)?
Performance indicators similar to a business enterprise's profit are readily available.
The primary operating purpose is not to provide goods or services at a profit.
Significant amounts of resources are provided by donors in nonreciprocal transactions.
Defined, transferable ownership interests do not exist.
Under the FASB Accounting Standards Codification, updates to GAAP are made as
Statements of Financial Accounting Standards.
Accounting Standard Updates.
Exposure Drafts.
Accounting Statements of Position.
The stakeholders of NFPs include
Resource providers
Members to whom certain economic benefits are provided directly.
Shareholders
Investors
One distinguishing characteristic of not-for-profit, nongovernmental entities is that they have no single indicator of performance, such as net income for business entities.
True
False
As an annual audit is performed on a company that is registered with the PCAOB, what must it include?
Balance sheet for the last 2 fiscal years. Statements of Income, Cash Flows, and Changes In Equity for the last 3 fiscal years.
Form 10-K (annual report) Form 10-Q (quarterly report) Form 8-K (after major event) Form 20-F (foreign issuers)
A nonreporting Issuer An Unseasoned Issuer A seasoned Issuer A well-known seasoned Issuer
FALSE - A measurement based on present value should reflect uncertainty so that variations in risks are incorporated.
What is SEC Regulation S-B
It applies to small business issuers and nonaccelerated filers.
It pertains to international trade agreements between countries.
It sets standards for environmental compliance in the financial industry.
It regulates the trading of securities on the stock market.
What is the purpose of information presented in notes to the financial statements?
To correct improper presentation in the financial statements.
To provide disclosures required by generally accepted accounting principles.
To present management's responses to auditor comments.
To provide recognition of amounts not included in the totals of the financial statements.
The FASB's conceptual framework describes six objectives of financial reporting by not-for-profit, nongovernmental entities, compared with only three for for-profit entities.
True
False
What type of value is when the cash or equivalent expected to be received for an asset in the due course of business, minus the costs of completion and sale? (It is used to measure short-term receivables and some inventories.)
Fair market value (fmv) or fair value
Net Present Value (npv)
Present value (pv) of future net cash flows
Net Realizable Value (NRV)
Assets, liabilities, and equity or net assets are elements of financial statements constituting resources or claims to them at a moment in time.
True
False
The principal benefit of a single set of global financial reporting standards is
Minimization of the amount of professional judgment required to implement them.
Increased ease of capital flow.
The convergence of global financial reporting standards.
Simplified enforcement for local and national regulatory bodies.
What are the 5 Elements of a Present Value Measurement?
Estimates of future cash flows.
Expected variability of their amount and timing.
The time value of money based on the risk-free interest rate.
The price of uncertainty inherent in an asset or a liability.
Other factors, such as liquidity or market imperfections.
A nonreporting issuer
A nonreporting Issuer
An Unseasoned Issuer
A seasoned Issuer
A well-known seasoned Issuer
What is Disclosure?
It applies to small business issuers and nonaccelerated filers.
To provide disclosures required by generally accepted accounting principles.
Notes are an integral part of the basic financial statements. Notes provide information essential to understanding the financial statements, including disclosures required by GAAP.
It applies to the reporting of interim and annual financial statements, including notes and schedules.
The act of releasing all relevant information on a company that may influence an investment decision—making public both positive and negative news, data, and other details about its operations, or that impact its operations, in a timely fashion.
A company has beginning net assets of $100,000 and ending net assets of $95,000. During the year, additional capital stock was sold for $8,000, and dividends of $3,000 were declared. Using the capital maintenance approach, the net income (loss) for the year is calculated as
$5,000
$(5,000)
$(10,000)
$0
Which of the following is a characteristic of nongovernmental not-for-profit entities (NFPs)?
Noneconomic reasons seldom underlie the decision to provide resources to NFPs.
Business entities and NFPs usually obtain resources in the same way.
Both NFPs and business entities use scarce resources in the production and distribution of goods and services.
The operating environment of NFPs ordinarily differs from that of business entities.
What type of value is the relevant attribute for trade payables and warranty liabilities?
Net Realizable Value (NRV)
Net Settlement Value
Present Value
Current (replacement) Cost
What are 4 criteria that determine whether and when items are incorporated into the financial statements?
According to the FASB's conceptual framework, the quality of information that enables users to identify similarities in and differences between two sets of economic phenomena is
Neutrality
Conservatism
Comparability
Matching
What is SEC Regulation S-K?
One set of estimated cash flows and One interest rate.
It provides disclosure standards.
It governs the types of documents the SEC requires to be filed electronically.
They are issued as interpretations to be followed by the SEC staff in administering disclosure requirements.
An accrued expense can best be described as an amount
Paid and currently matched with earnings.
Not paid and not currently matched with earnings.
Not paid and currently matched with earnings.
Paid and not currently matched with earnings.
What is SEC Regulation S-T?
It governs the types of documents the SEC requires to be filed electronically.
It details the regulations for exporting goods to foreign markets.
It specifies the requirements for obtaining a broker-dealer license.
It outlines the procedures for conducting shareholder meetings.
What is used when using the traditional approach to calculating present value?
It governs the types of documents the SEC requires to be filed electronically.
One set of estimated cash flows and One interest rate.
One set of actual cash flows and One discount rate.
Multiple sets of estimated cash flows and Multiple interest rates.
True or False - The purpose of a present value measurement of the fair value of a liability is to estimate the value of the assets needed to settle the liability.
True
False
According to the FASB's conceptual framework, which of the following most likely does not violate the concept of faithful representation?
Management reports to shareholders regularly refer to new projects undertaken, but the financial statements never report project results.
Report data on segments having the same expected risks and growth rates to analysts estimating future profits.
Financial statements were issued 9 months late.
Financial statements included property with a carrying amount increased to management's estimate of market value.
Which of the following is a true statement about the objective of general-purpose financial reporting?
Financial reporting directly measures management performance.
Financial reporting is ordinarily focused on industries rather than individual entities.
The information provided relates to the entity's economic resources and claims.
The objective applies only to information that is useful for investment professionals.
The FASB makes changes to the Accounting Standards Codification by issuing
Staff Technical Bulletins.
Accounting Standards Updates.
Statements of Financial Accounting Standards.
Emerging Issues Task Force Releases.
The definition of a smaller reporting company with respect to market value, as established by the U.S. Securities and Exchange Commission, includes companies with less than exactly what amount in public equity float?
$75 million
$100 million
$125 million
$150 million
True or False - The category of filers with the largest market capitalization must submit Form 10-Q within 40 days of the end of the quarter. The category of filers with the smallest market capitalization has up to 45 days.
True
False
What type of value is when the cash or equivalent realizable by selling an asset in an orderly liquidation (not in a forced sale)? It is used to measure some marketable securities, e.g., those held by investment entities or assets expected to be sold at below their carrying amount.
Current Market Value
Historical Cost
Net Realizable Value
Present Value
True or False - GAAP in the U.S. for federal, state, and local governmental bodies is established by the Governmental Accounting Standards Board (GASB).
True
False
What is an example of systematic and rational allocation of expenses?
Current (replacement) cost
Present value
Net settlement value
Amortization or depreciation
What are the 4 categories of issuers under the SEC's integrated disclosure system?
According to Statements of Financial Accounting Concepts, predictive value relates to
Relevance - Yes. Faithful Representation - No.
Relevance - No. Faithful Representation - Yes.
Relevance - No. Faithful Representation - No.
Relevance - Yes. Faithful Representation - Yes.
Which of the following accounting concepts states that an accounting transaction should be supported by sufficient evidence to allow two or more qualified individuals to arrive at essentially similar measures and conclusions?
Stable monetary unit
Verifiability
Periodicity
Matching
What type of value is in theory the most relevant method of measurement because it incorporates time value of money concepts?
Assumptions
Dcf Valuation
Present Value
Future Value
According to the FASB's conceptual framework, the quality of information that helps users increase the likelihood of correctly forecasting the outcome of past or present events is called
Predictive Value
Confirmatory Value
Representational faithfulness
Comparability
Costs that can be reasonably associated with specific revenues but not with specific products should be
Expensed in the period in which the related revenue is recognized.
Charged to expense in the period incurred.
Capitalized and then amortized over a period not to exceed 60 months.
Allocated to specific products based on the best estimate of the production processing time.
According to the FASB's conceptual framework, neutrality relates to
Faithful Representation - No. Relevance - Yes.
Faithful Representation - Yes. Relevance - Yes.
Faithful Representation - Yes. Relevance - No.
Faithful Representation - No. Relevance - No.
What type of cost is the cash (or equivalent) paid to acquire an asset?
Quality Of Labor
Historical Cost
Monetary Measurement
Residual Value
Under SFAC No. 6, Elements of Financial Statements, interrelated elements of financial statements include
Yes to both Distributions to Owners and Notes to Financial Statements.
Yes to Distributions and No to Notes.
No to both.
No to Distributions and Yes to Notes.
True or False - The objective of present value measurement is to estimate fair value by distinguishing the economic differences between sets of future cash flows that may vary in amount, timing, and uncertainty.
True
False
True or False - The cash basis of accounting is preferable to the accrual basis for evaluating past performance.
True
False
What is Financial Reporting Releases (FRRs)?
Announcements of accounting and auditing matters of general interest.
Regulations governing the construction of financial institutions.
Standards for quality control in manufacturing processes.
Guidelines for managing human resources within a company.
True or False - A measurement based on present value should avoid uncertainty so that variations in risks are excluded.
True
False
What is SEC Staff Accounting Bulletins (SABs)?
They are recommendations for investors on stock purchases.
They are guidelines for companies to avoid SEC regulations.
They are legal documents required for SEC audits.
They are issued as interpretations to be followed by the SEC staff in administering disclosure requirements.
In the determination of a present value, which of the following relationships is true?
The higher the future cash flow and the longer the discount period, the lower the present value.
The lower the discount rate and the shorter the discount period, the lower the present value.
The higher the discount rate and the longer the discount period, the lower the present value.
The lower the future cash flow and the shorter the discount period, the lower the present value.
During the lifetime of an entity, accountants produce financial statements at arbitrary moments in time in accordance with which basic accounting concept?
Verifiability
Conservatism
Periodicity
Matching
According to SFAC 7, Using Cash Flow Information and Present Value in Accounting Measurements, a required element of every present value measurement is
Annuity payments
Future value tables
Probabilities of possible cash flows
The time value of money
The content of the Management's Discussion and Analysis (MD&A) section of an annual report is
Mandated by regulations of the Internal Revenue Service.
Mandated by regulations of the Securities and Exchange Commission.
Mandated by pronouncements of the Financial Accounting Standards Board.
Reviewed by Independent auditors.
True or False - The constraints on financial accounting include industry practices and conservatism.
True
False
True or False - Among the assumptions underlying financial accounting that are not found in any official pronouncements are economic entity, going concern, monetary unit, and full disclosure.
True
False
What is SEC Regulation S-X?
It applies to the disclosure of executive compensation.
It applies to the calculation of income tax deductions.
It applies to the regulation of environmental impact assessments.
It applies to the reporting of interim and annual financial statements, including notes and schedules.
Revenues of an entity are usually measured by the exchange values of the assets or liabilities involved. According to the FASB's conceptual framework, recognition of revenue does not occur until
The entity has substantially accomplished what it agreed to do.
Products or services are exchanged for cash or claims to cash.
The revenue is realizable.
The revenue is realized and earned.
True or False - The GASB maintains that there are no major differences in the objectives of governmental financial reporting of governmental-type activities and business-type activities.
True
False
According to the FASB conceptual framework, which of the following correctly pairs a fundamental qualitative characteristic of useful financial information with one of its aspects?
Relevance and materiality.
Faithful representation and predictive value.
Faithful representation and confirmatory value.
Relevance and neutrality.
True or False - Information about cash flows should help users evaluate financing and investing activities.
True
False
Which of the following is a primary objective of financial reporting according to the FASB's conceptual framework?
To provide information that is useful for making investment and credit decisions.
To ensure that all financial statements are audited.
To comply with all regulatory requirements.
To minimize the amount of taxes paid by the entity.
True or False - The FASB's conceptual framework includes the principle of 'materiality,' which states that all financial information must be included in the financial statements regardless of its significance.
True
False
According to the FASB's conceptual framework, which quality of information ensures that financial statements are free from bias?
Relevance
Faithful Representation
Neutrality
Comparability
What is the primary purpose of the Statement of Cash Flows?
To provide information about the financial position of a company.
To provide information about the cash receipts and cash payments of a company during a period.
To provide information about the profitability of a company.
To provide information about the changes in equity of a company.
Which of the following is an example of a noncurrent asset?
Accounts Receivable
Inventory
Property, Plant, and Equipment
Prepaid Expenses
According to the FASB's conceptual framework, which of the following enhances the qualitative characteristic of relevance?
Comparability
Verifiability
Timeliness
Understandability
Which of the following is not a primary qualitative characteristic of financial information according to the FASB's conceptual framework?
Relevance
Faithful Representation
Comparability
Materiality
True or False - The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of an entity during a period.
True
False
According to the FASB's conceptual framework, which of the following enhances the usefulness of information that is relevant and faithfully represented?
Timeliness
Verifiability
Understandability
All of the above
Which of the following is a primary objective of financial reporting according to the FASB's conceptual framework?
To provide information that is useful for making investment and credit decisions.
To ensure that all financial statements are audited.
To provide information on the market value of a company's assets.
To comply with all regulatory requirements.
Under the accrual basis of accounting, revenues are recognized when
Cash is received.
The performance obligation is satisfied.
Expenses are paid.
Dividends are declared.
Which of the following is not a component of the FASB's conceptual framework for financial reporting?
Objectives of financial reporting.
Qualitative characteristics of useful financial information.
Elements of financial statements.
Regulations for international trade.
Which of the following is a primary objective of financial reporting?
To provide information that is useful for making investment and credit decisions.
To provide information about the liquidation value of an entity.
To provide information about the market value of an entity's assets.
To provide information about the entity's compliance with tax regulations.
True or False - The FASB's conceptual framework includes the objective of providing information that is useful to present and potential investors, creditors, and others in making rational investment, credit, and similar decisions.
True
False
Which of the following is considered a constraint in financial reporting according to the FASB's conceptual framework?
Relevance
Faithful Representation
Cost Constraint
Comparability
Which of the following is a primary qualitative characteristic of useful financial information according to the FASB's conceptual framework?
Comparability
Relevance
Timeliness
Understandability
True or False - The historical cost principle requires that assets be recorded at their original purchase price.
True
False
Which of the following is an example of a noncurrent liability?
Accounts Payable
Notes Payable (due in 2 years)
Accrued Expenses
Unearned Revenue
Which of the following is a primary objective of financial reporting for not-for-profit entities?
To provide information useful in making investment and credit decisions.
To provide information about the economic resources, obligations, and net resources of the entity.
To provide information about the performance of the entity during a period.
All of the above.
True or False - The FASB's conceptual framework includes the concept of 'economic entity' which states that the activities of the entity are separate from those of its owners and other entities.
True
False
What is the primary purpose of the Statement of Financial Position for a not-for-profit organization?
To show the financial performance of the organization over a period of time.
To provide information about the organization's assets, liabilities, and net assets at a specific point in time.
To detail the cash inflows and outflows of the organization.
To report the changes in net assets due to revenues, expenses, gains, and losses.
Which of the following is a primary objective of financial reporting according to the FASB's conceptual framework?
To provide information that is useful for making investment and credit decisions.
To ensure that all financial statements are audited.
To provide information on the market value of the company's assets.
To comply with all regulatory requirements.
True or False - The FASB's conceptual framework includes the principle of conservatism as a qualitative characteristic of financial information.
True
False
According to the FASB's conceptual framework, which of the following enhances the qualitative characteristic of relevance?
Timeliness
Verifiability
Comparability
Understandability
Which of the following is a primary objective of financial reporting for not-for-profit entities?
To provide information useful in making investment and credit decisions.
To provide information about the economic resources, obligations, and net resources of the entity.
To provide information about the performance of the entity during a period.
All of the above.
True or False - The FASB's conceptual framework includes the objective of providing information that is useful to present and potential investors, creditors, and others in making rational investment, credit, and similar decisions.
True
False
According to the FASB's conceptual framework, which of the following is considered an enhancing qualitative characteristic of useful financial information?
Relevance
Faithful representation
Timeliness
Materiality
Which of the following is a primary objective of financial reporting?
To provide information about the financial position, performance, and changes in financial position of an entity.
To provide information about the market value of an entity's assets.
To provide information about the personal financial status of the entity's management.
To provide information about the entity's compliance with tax regulations.
True or False - The matching principle requires that expenses be recognized in the same period as the revenues they help to generate.
True
False
According to the FASB's conceptual framework, which of the following enhances the usefulness of information that is relevant and faithfully represented?
Timeliness
Verifiability
Comparability
All of the above
Which of the following is a primary objective of financial reporting for business enterprises?
To provide information that is useful for making investment and credit decisions.
To provide information about the liquidation value of the resources held by the enterprise.
To provide information that will attract new investors.
To provide information about the management and shareholders of the enterprise.
According to the FASB's conceptual framework, which of the following enhances the qualitative characteristic of relevance?
Comparability
Verifiability
Timeliness
Understandability
What is the primary purpose of the statement of cash flows?
To provide information about the financial position of an entity at a point in time.
To provide information about the cash receipts and cash payments of an entity during a period.
To provide information about the profitability of an entity during a period.
To provide information about the changes in equity of an entity during a period.
What is the primary purpose of the Statement of Cash Flows?
To provide information about an entity's financial position.
To provide information about an entity's cash receipts and cash payments.
To provide information about an entity's profitability.
To provide information about an entity's revenue recognition policies.
Which of the following is a qualitative characteristic of useful financial information according to the FASB's conceptual framework?
Relevance
Liquidity
Solvency
Profitability
What is the purpose of the Management Discussion and Analysis (MD&A) section in a company's annual report?
To provide a summary of the company's financial performance.
To offer management's perspective on the financial results and future outlook.
To list the company's accounting policies.
To disclose the company's compliance with regulatory requirements.
Which of the following is a primary qualitative characteristic of useful financial information according to the FASB's conceptual framework?
Relevance
Comparability
Verifiability
Timeliness
Under the accrual basis of accounting, revenues are reported in the period when
Cash is received
They are earned
Expenses are paid
Dividends are declared
Which of the following is considered a constraint in financial reporting according to the FASB's conceptual framework?
Materiality
Faithful Representation
Relevance
Comparability
