ACC 321: Ch.1

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

Easier access to capital

The residual interest in the assets of an entity that remains after deducting its liabilities is referred to as what?

Equity

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

Foreign companies that issue stock in the U.S.

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

GASB (Government Accounting Standards Board)

The International Accounting Standards Committee provides oversight, appoints members, and raises funds to support the

IASB (International Accounting Standards)

The International Accounting Standards Committee issued International Accounting Standards (IAS), whereas the International Accounting Standards Board currently issues

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 _____

International Financial Reporting Standards.

Who has the responsibility to appropriately apply GAAP when preparing financial statements?

Management

Conservatism is inconsistent with which characteristic of accounting information?

Neutrality

For accounting information to be _____ it must possess predictive value and/or confirmatory value

Relevant / relevance

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.

True

Accounting information meets the qualitative characteristic of consistency if it is measured and reported the same way

across different reporting periods.

Recognition refers to the process of

admitting information in the basic financial statements.

What element of the financial statements is described by the following definition? "Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions."

assets

Accounting information is _______ if similar items are treated the same way among various companies highlighting similarities and differences between events and conditions.

comparable

Faithful representation requires that information be

complete neutral free from error

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

decision usefulness.

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

differences

Assets are probable ______ economic benefits as a result of ______ transactions or events.

future; bad

The IASB is dedicated to developing a set of high-quality, understandable, and enforceable ____ accounting standards

global, international, universal, or world

The assumption that a business entity will continue to operate indefinitely in the future refers to what assumption?

going concern

Increases in equity of a particular business enterprise resulting from transfers to it from other entities of something of value to obtain or increase ownership interests is a(n) _____ by owners.

investment, contribution, or investments

Increases in equity of a particular business enterprise resulting from transfers to it from other entities or individuals of something of value to obtain or increase ownership interests in it are called

investments by owners.

____ are the obligations of a company.

liabilities or 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?

liability

The assumption that financial statement elements should be measured in terms of the United States dollar for U.S. financial reporting is referred to as the ___ unit assumption

monetary

Which of the following are among the basic assumptions underlying U.S. GAAP?

monetary unit economic entity going concern periodicity

Another term for equity is

net assets

Proponents of objectives-based standards assert that ______

professional judgment minimizes sidestepping of rules

The primary purpose of financial reporting is to provide useful information for decision making to ______

providers of capital

Predictive value and confirmatory value are components of which primary qualitative characteristic?

relevance

Ethics deals with the ability to distinguish ______ from ______

right, wrong

Faithful representation exists when

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

The "Accounting Constitution", a coherent system of interrelated objectives and fundamentals that lead to consistent standards and that prescribe the nature, function, and limits of financial accounting and reporting is referred to as the _____ framework.

conceptual

What component of financial information helps investors analyze their prior assessments regarding a company's cash flow generating ability?

confirmatory value

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

confirmatory value predictive value

The tendency to recognize unfavorable items more quickly than favorable items is referred to

conservatism

The qualitative characteristic of using the same accounting method each period over time refers to the concept of ____

consistency

Cost effectiveness is a(n) _____ on the accounting choices a company makes.

constraint

The Sarbanes-Oxley Act increases accountability of who?

corporate executives

Decreases in equity of a particular enterprise resulting from transfers to owners is called

distributions to owners.

Decreases in equity of a particular enterprise resulting from transfers to owners are called ___ to owners

distributions, distribution, disbursement, or disbursements

An essential assumption in accounting is that all economic events can be identified specifically with an individual economic ______

entity

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

establish objectives and fundamental concepts on which to base standards.

Allowing the life of a company to be divided into artificial time periods in order to provide timely information is referred to as the ___ assumption

periodicity

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

timing uncertainty amount

Recent events suggest that full convergence ______ be achieved in the foreseeable future. a) will b) will not

will not

What are the advantages of one global accounting framework?

- Facilitate access to capital. - Improve comparability.

Which of the following are steps the FASB takes before issuing an Accounting Standards Update?

- The Board holds a public meeting - Receives requests from stakeholders

Criticisms of the objectives-oriented approach for accounting standards are

- professional judgment may result in different treatments of similar transactions. - an absence of rules may lead to intentional misuse of a standard.

The IASB's main objective is to develop a single set of standards that have what characteristics?

- understandable - enforceable - high-quality

Before issuing an Accounting Standards Update, the FASB undertakes a series of information-gathering steps including

- written comments - deliberations - open hearings

Criticisms of the objectives-oriented approach for accounting standards are ______

1. An absence of rules may lead to intentional misuse of a standard. 2. Professional judgment may result in different treatments of similar transactions.

Why is accounting standard setting a political process?

1. Changes in standards can result in a substantial redistribution of wealth within our economy. 2. Standards can have significant effects on companies, investors, and creditors.

The involvement of accounting professionals and management in accounting scandals resulted in Congress passing the Sarbanes-Oxley Act. What is the purpose of the Sarbanes-Oxley Act?

1. Provide penalties for violators. 2. Require accountability of corporate executives. 3. Addresses conflicts of interests. 4. Regulate auditors.

The FASB's standard setting process begins when the board adds a project to its technical agenda. Organize the remaining steps in the FASB's accounting standard setting process in correct order.

1. The board deliberates at one or more public meetings 2. The board issues an Exposure Draft or Discussion Paper. 3. The staff analyzes comment letters. 4. The board issues an Accounting Standard Update

As of July 1, 2009, the single source of nongovernmental U.S. GAAP is found in the

Accounting Standards Codification.

An essential assumption underlying GAAP is that all economic events can be identified with what?

An economic entity

The FASB Accounting Standards ___ organizes all relevant accounting pronouncements in a searchable, online database

Codification (Mã hóa)

An enhancing qualitative characteristic of accounting information that allows users to better understand similarities and differences in the financial reports across different companies is called _____

Comparability

______ include(s) all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Comprehensive income

Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles?

Corporate management

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

Ethics, or Ethical

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

FASB (Financial Accounting Standard Board)

private sector organization that sets accounting standards in the United States is the ____

FASB (Private Accounting Standards Board)

What was the purpose of the FASB Accounting Standards Codification project?

Reorganize all relevant accounting pronouncements in U.S. GAAP.

What does it mean if information is cost effective?

The benefits of providing financial information exceed the costs of doing so.

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

To develop high quality global standards used to make economic decisions

T/F --- The FASB considers written comments from interested parties before issuing an Accounting Standards Update.

True Reason: The FASB has an extensive due process including open hearings, deliberations, and written comments.

True or false: Political pressure has deterred the FASB from issuing particular standard changes.

True Reason: The FASB deals with intense political pressure over controversial accounting standards, and has changed standards in response.

True or false: The conceptual framework does not prescribe GAAP.

True Reason: The conceptual framework provides an underlying foundation for accounting standards.