Quiz 2- CFAS

The new definition of an asset (a liability) focuses on the asset (liability) being A. a present right (obligation) that has resulted from past events and has the potential to produce (cause a transfer of) economic benefits. B. the expected intlows (outtlows) oft economic benefits that are both probable and can be measured reliably. C. a physical object (a duty to pay cash or other resources) D. All of these.

A

The Conceptual Framework is least applicable in which of the following cases? A. to account for a transaction that is specifically dealt with by a Standard B. in resolving issues not addressed directly by a Standard C. in developing Standards D. in analyzing and interpreting Standard

A.

The Conceptual Framework (choose the incorrect statement) A. is concerned with general purpose financial reporting only. B. is not a PFRS. C. prevails over the PFRSs in cases of conflicts. D. in the absence of a PFRS, shall be considered by management when making its judgment in developing and applying an accounting policy that results in useful information.

C

Which of the following statements is incorrect regarding the purpose of the Conceptual Framework? A. Globally acceptable Standards reduces the information gap between financial statement users and the reporting entity's management. B. The Conceptual Framework is intended to provide a foundation for the development of globally acceptable Standards. C. The Conceptual Framework prescribes the concepts for both general purpose and specific purpose financial reporting D. Globally acceptable Standards contribute to economic efficiency by lowering the cost of capital and reducing international reporting costs

C

Which of the following would least likely to need general purpose financial statements in making economic decisions? A. Stockholders B. Potential investors C. Management D. Lenders

C

This qualitative characteristic is unique in the sense that it necessarily requires at least two items.

Comparability

Entity A determined that an asset exists. However, the asset's low probability of inflows of economic benefits and its very high level of measurement uncertainty affected Entity A'srecognition decisions about the asset, as these raised doubt on whether the asset's recognition would result in useful information. Consequently, Entity A did not recognize the asset, but because Entity A deemed it relevant, information about the asset was nonetheless provided in the notes. Which of the following statements is correct? A. Entity A's treatment for the asset is acceptable. The asset is referred to as a non-existent asset. B. Entity A's non-recognition of the asset is correct. However, the asset should have been completely ignored as providing information about unrecognized items in the notes is not acceptable under the Conceptual Framework. C. Entity A's accounting treatment is grossly incorrect because, according to the Conceptual Framework, all items that meet the definition of an asset should always be recognized, regardless of the asset's potential to produce economic benefits and its measurement uncertainty. D. Entity A's treatment for the asset is acceptable. The asset is referred to as an unrecognized asset

D

Which of the following enhances the comparability of information? A. Making unlike things look alike. B. Making like things look different. C. Using different methods to account for similar transactions from period to period. D. Consistent application of accounting policies from period to period

D

Which of the following is excluded from the scope of the Conceptual Framework? A. Qualitative characteristics of useful financial information. B. The objective of financial reporting C. Definitions, recognition criteria and derecognition of financial statement elements. D. Descriptions of the measurement bases used in financial reporting E. The components of a complete set of financial statements and their presentation requirements.

E

According to the Conceptual Framework, these are the qualitative characteristics that make information useful to users.

Fundamental

These are users of financial information who are not in a position to require a reporting entity to prepare reports tailored to their particular information needs.

Primary users

Information that is capable of making a difference in the decisions made by users has this qualitative characteristic.

Relevance

Entity A is assessing whether an item meets the definition of a financial statement element. Entity A considers the transaction's substance and economic reality rather than merely its legal form. Entity A is applying which of the following accounting concepts?

Substance over form

According to the Conceptual Framework, this information provides a direct indication of how well management has discharged its responsibilities to make efficient and effective use of the reporting entity's resources.

The return that the entity has produced from its economic resources.

Information has this qualitative characteristic if different, knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation.

Verifiability

An increase in the carrying amount of an asset could not possibly result in a. no change in total equity. b. the recognition of an expense. c. an increase in total equity d. the recognition of an income.

a

Which of the following does not meet the definition of an asset? a. Equipment that the entity intends, and is very certain, to acquire in the future. b. Inventories purchased and received but not yet paid. c. Land received from a donation. d. A publishing title for a college textbook. The publishing title has no physical substance, meaning you cannot see or touch it.

a

Which of the following is not an indication of an economic resources potential to produce economic benefits? a. The resource has no use in the entity's operations and has no resale value. b. The economic resource can be used in combination with other resources to produce goods for sale. c. The economic resource can be distributed to the owners. d. The economic resource can be used to pay liabilities.

a

Which of the following is incorrect regarding the objective of general purpose financial reporting? a. The objective of general purpose financial reporting is to provide information that is useful to primary users in making decisions about providing resources to the entity. b. General purpose financial reporting provides information about an entity's economic resources, claims, and changes in those resources and claims, but not on the utilization or those resources by the entity's management. c. The objective of general purpose financial reporting forms the foundation of the Conceptual Framework. d. Decisions about providing resources to the entity depend on the users expected returns, which in turn, depend on assessments of the entity's prospects for future net cash inflows and management stewardship.

b

The Conceptual Framework uses the term "claims" against the reporting entity to refer to

both liabilities and equity

Which of the following is an example of a qualitative factor used in making materiality judgments? a. 10% of total revenues b. P25,000 or more c. The context of an item in relation to a current crisis in the banking and insurance industry. d. 2.5% of total assets

c

Which of the following is not a factor to consider when applying the qualitative characteristics? a. The information must be both relevant and faithfully represented for it to be useful. b. Sometimes, it may be necessary to make trade-offs between the qualitative characteristics in order to provide useful information. c. To be useful, information need only to meet one, but not necessarily all, of the qualitative characteristics. d. The enhancing qualitative characteristics only enhance the usefulness of information but cannot make irrelevant information or erroneous information to be useful.

c

Which of the following is not one of the aspects in the revised definition of an asset? a. Right b. Potential to produce economic benefits c. Probability of the expected inflows of economic benefits from the asset d. Control

c

Which of the following statements about the concepts in the Conceptual Framework is least accurate? a. Recognition means including an item in the totals of the financial statements when that item meets the definition of a financial statement element and recognizing it would result in useful information. b. A low probability of expected inflows or outflows of economic benefits resulting from an asset or liability may affect the recognition of that asset or liability, but not necessarily its existence c. General purpose financial reports are intended to meet equally the needs of all types of external users. d. A high level of measurement uncertainty associated with an asset or liability can affect the faithful representation of that asset or liability, but not necessarily its relevance

c

Which of the following statements best explains why the reporting entity's management and government regulators are not considered primary users under the Conceptual Framework? a. These users are considered related parties, and hence do not make relevant decisions. b. These users have the ability to curtail the operations of the reporting entity and therefore have the ability to affect the entity's going concern. c. These users have the power to demand information they need directly from the reporting entity. d. All of these

c

Which of the following is not one of the primary users listed in the Conceptual Framework? a. Investors b. Lenders c. Creditors d. Debtors

d

Which of the following will most likely affect determination of whether an asset or a liability exists? a. All of these are relevant in determining the existence of an asset or a liability, according to the Conceptual Framework. b. A low probability that the asset or liability will cause inflows or outflows of future economic benefits. c. A high level of measurement uncertainty regarding the asset or liability. d. An unresolved dispute over a right or obligation.

d

According to the revised Conceptual Framework, the degree of uncertainty in the expected inflows or outflows of economic benefits from an asset or liability or the degree of measurement uncertainty associated with that asset or liability

does not necessarıly affect the conclusion that an asset or a liability exists, although it may affect recognition decisions about the asset or liability

General purpose financial statements are designed to

meet the most of the common needs of most primary users

When making materiality judgments, the overriding consideration is

the ability of the item being judged to influence users' decisions.