Intermediate Accounting Chapter 1 and 2

ethics

A code or moral system that provides criteria for evaluating right or wrong is referred to as .

Cost effectiveness

A company should disclose information only if the perceived benefits of the disclosure exceed the costs of providing the information. Which constraint does this statement describe?

verifiability

A consensus among different individuals appraising the value of land describes which qualitative accounting characteristic

Materiality

A consequence is that GAAP need not be followed in all situations

confirmatory value predictive value

According to the conceptual framework, for accounting information to be relevant, what qualities must it possess?

Cash Basis Accounting

Accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash.

Economic entity assumption

All economic events can be identified with a particular entity

Consistency

Allied Appliances, Inc., changed its revenue recognition policies. Which characteristic is jeopardized by this change?

Net assets

Another term for equity is

Going concern assumption

Assumes the entity will continue indefinitely

Net operating cash flow

Cash basis accounting produces:

Neutrality

Conservatism is inconsistent with which characteristic of accounting information

Neutrality

Donald Kirk, former chairman of the FASB, once noted that " . . . there must be public confidence that the standard-setting system is credible, that selection of board members is based on merit and not the influence or special interests . . ." Which characteristic is implicit in Mr. Kirk's statement?

there is agreement between a measure or description and the phenomenon it purports to represent

Faithful representation exists when

completeness neutrality free from material error

Faithful representation requires information to have which of the following characteristics?

IASB (International Accounting Standards Board)

Group that identifies preferred accounting practices & encourages global acceptance; issues IFRS (International Financial Reporting Standards)

Predictive value and/or confirmatory value

In general, relevant information possesses which qualities?

Monetary unit assumption

Inflation causes a violation of this assumption

Full disclosure principle

Information that could affect decision making should be reported

Comparability

Jeff Brown is evaluating two companies for future investment potential. Jeff's task is made easier because both companies use the same accounting methods when preparing their financial statements. Which characteristic does the information Jeff will be using possess?

Timeliness

National Bancorp, a publicly traded company, files quarterly and annual financial statements with the SEC. Which characteristic is relevant to the timing of these periodic filings?

Conservatism

Not a qualitative characteristic, but a practical justification for some accounting choices

material

Predictive value, confirmatory value, and all relate to the fundamental characteristic of relevance in financial information

Expense recognition

Recognizing expenses in the period they were incurred to produce revenue

International Organization of Securities Commissions

Regulatory oversight - IFRS

Periodicity assumption

Relates to the qualitative characteristic of timeliness

FASB (Financial Accounting Standards Board)

The ( ) was established to set U.S. accounting standards and is the current standard setting body.

accountants

The AICPA is the national professional organization for certified professional public

topics and subtopics.

The Accounting Standards Codification is organized into

differences

The FASB and IASB will continue to work together to converge where possible, but ( ) between IFRS and U.S. GAAP will likely remain.

FASB (Financial Accounting Standards Board)

The Financial Accounting Foundation provides oversight, appoints members, and raises funds to support the:

global, international, universal, or world

The IASB is dedicated to developing a set of high-quality, understandable, and enforceable 1Blank 1 global accounting standards.

International Financial Reporting Standards (IFRS)

The International Accounting Standards Committee (IASC) reorganized in 2001 to create a new standard-setting body called the International Accounting Standards Board (IASB). The IASB issues global accounting standards called

Governmental Accounting Standards Board (GASB)

The acronym GASB refers to the

Securities and Exchange Commission (SEC)

The agency of the U.S. government that oversees U.S. financial markets and accounting standard-setting bodies.

Historical cost principle

The basis for measurement of many assets and liabilities

Cost effectiveness

The benefits of providing accounting information should exceed the cost of doing so

Net operating cash flow

The difference between cash receipts and cash disbursements from providing goods and services

Governmental Accounting Standards Board.

The organization that is responsible for Accounting standards and the standard setting process for states and cities in the United States is the

decision usefulness

The overriding objective in the hierarchy of qualitative characteristics of financial reporting information is

decision usefulness

The primary focus of the qualitative characteristics of accounting information is:

Financial Accounting Standards Board (FASB)

The private sector organization that is currently responsible for setting accounting standards in the United States is the

establish objectives and fundamental concepts on which to base standards

The purpose of the FASB's conceptual framework in accounting is to

True

True or false: In 2007, the SEC eliminated the requirement of foreign companies issuing stock in the United States to include a reconciliation of IFRS to U.S. GAAP in their financial statements.

Facilitate access to capital. Improve comparability.

What are the advantages of one global accounting framework?

- amount - uncertainty - timing

What information regarding an entity's future cash flows are investors and lenders interested in?

Faithful representation

When there is agreement between a measure or description and the phenomenon it purports to represent, information possesses which characteristic?

Materiality

Which component would allow a large company to record the purchase of a $120 printer as an expense rather than capitalizing the printer as an asset?

liability

Which of the following is a probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events?

The Conceptual Framework

Which of the following provides an underlying structure for the development of accounting standards?

To develop high quality global standards

Which of the following represent(s) an important objective of the IASB? International Accounting Standard Board

To develop high quality global standards used to make economic decisions

Which of the following represents the IASB's primary objective?

Foreign companies that issue stock in the U.S.

Which of the following types of companies may currently utilize IFRS for financial reporting in the U.S.?

Easier access to capital

Which of the following would be a likely advantage of a single set of accounting standards

Enhanced financial statement comparability

Which of the following would be a likely advantage of a single set of accounting standards?

Emerging Issues Task Force (EITF)

responsible for providing more timely responses to emerging financial reporting issues.