Research Midterm

Derecognition guidance is presented within which section of certain Codification topics?

40

True or False: In your career, you will likely not perform accounting research until you reach the manager or senior manager level.

False

True or False: Paraphrasing guidance from the Codification (that is, summarizing the guidance in your own words) is far more impactful in a memo than using actual excerpts from the Codification

False

True or False: The Codification includes auditing guidance.

False

True or False: The FASB's Concepts Statements are considered authoritative guidance.

False

True or False: You should always include discussion of your scope review in your accounting issues memoranda.

False

Industry-specific guidance in the Codification generally applies ___________ other general Codification content.

In addition to

Inventory costing is a matter of ___________ measurement. Inventory obsolescence is a matter of ____________ measurement

Initial subsequent

__________ companies issue financial statements because they are required to do so by the SEC. _________ companies may issue financial statements as necessary to satisfy the requirements of their investors, lenders, and other stakeholders.

Public Private

The __________ gave the SEC __________ authority to establish accounting standards.

Securities Exchange Act of 1934 Statutory

True or False: A researcher who does not first understand the client's business runs the risk of asking questions about a transaction that are not informed.

True

True or False: An important step when creating content for a presentation is to picture your audience.

True

True or False: Guidance in the Codification applies to both public and nonpublic companies.

True

True or False: The Codification is the authoritative source of GAAP. This means that in order to receive an unmodified audit opinion, entities must prepare their financial statements in accordance with Codification guidance.

True

In the following reference, which number reflects the Codification topic? ASC 842-20-25-1 a. 842 b. 20 c. 25 d. 1

a. 842

In what setting would the level of detail shown in the following slide be most appropriate? Image a. A roundtable format, where each participant has a copy of the slides and is responsible for participating in decision making b. In an auditorium presentation, where the speaker is addressing 100 to 500 audience members c. In a classroom setting, where a team is presenting/teaching key judgments from a case to 30 peers and the peers do not have a copy of the slides

a. A roundtable format, where each participant has a copy of the slides and is responsible for participating in decision making

Choose the correct statement regarding the effective date of revised revenue guidance. a. ASC 606 (Revenue from Contracts with Customers) supersedes ASC 605 (Revenue Recognition) and became effective in periods beginning after 12/15/17 b. ASC 605 (Revenue Recognition) supersedes ASC 606 (Revenue from Contracts with Customers) and became effective in periods beginning after 12/15/17.

a. ASC 606 (Revenue from Contracts with Customers) supersedes ASC 605 (Revenue Recognition) and became effective in periods beginning after 12/15/17

CON 6 may be useful for which of the following? a. Determining whether a cost meets the definition of "asset" b. Offering current viewpoints on recent FASB guidance c. Evaluating present value measurement issues d. Benchmarking against other public companies' disclosures

a. Determining whether a cost meets the definition of "asset"

Per ASC 105 (Generally Accepted Accounting Principles), when should nonauthoritative sources be used? a. First, look for the exact situation in GAAP. If not available, look for GAAP for similar transactions. If not available, nonauthoritative sources (such as firm guidance and IFRS) may be used. b. First, look for the exact situation in GAAP. If not available, look to Conceptual Framework guidance to understand broad principles. If this guidance does not apply, nonauthoritative sources (such as firm guidance and IFRS) may be used. c. First, look for the exact situation in GAAP. If not available, look for similar guidance under IFRS or the Conceptual Framework. If not available, look to firm guidance. d. First, look for the exact situation in GAAP. If not available, look to pre-Codification standards for additional information. If not available, nonauthoritative sources may be used.

a. First, look for the exact situation in GAAP. If not available, look for GAAP for similar transactions. If not available, nonauthoritative sources (such as firm guidance and IFRS) may be used.

The chapter emphasizes that your presentation should always include an Agenda slide. This is because (select the two best answers): Select one or more: a. Having an agenda shows meeting participants that your meeting has a valid purpose and is organized. b. Having an agenda shows respect for participants' time. c. Having an agenda can actually be negative, because it takes away the suspense of having your audience stay interested in what might be coming next. d. Having an agenda is only necessary if you are giving the presentation in a standing, presenting in front of a projector format.

a. Having an agenda shows meeting participants that your meeting has a valid purpose and is organized. b. Having an agenda shows respect for participants' time.

When does testing of property, plant, and equipment for impairment take place? a. If circumstances (aka, triggering events) indicate that the carrying value of an asset or asset group may not be recoverable b. At each annual reporting period c. At each quarterly and annual reporting period d. At regular intervals based on each individual company's policy election

a. If circumstances (aka, triggering events) indicate that the carrying value of an asset or asset group may not be recoverable

The discount rate adjustment technique and expected present value technique are techniques for measuring which of the following? a. Present value b. Net realizable value c. Historical cost d. Market value

a. Present value

Quotation marks should always be included around authoritative excerpts, with which exception? a. Quotation marks aren't necessary if you indent the excerpt and include a clear reference to the ASC (such as ASC 842-10-25-1). b. Quotation marks aren't necessary if you've changed words within the quote. c. Quotation marks aren't necessary if you include brackets [ ] around the excerpt. d. Quotation marks aren't necessary if you include a clear reference to the ASC (such as ASC 842-10-25-1).

a. Quotation marks aren't necessary if you indent the excerpt and include a clear reference to the ASC (such as ASC 842-10-25-1).

Which of the following reflects the correct chronological order of historical and current standard setters? a. The SEC was first granted authority, then the Committee on Accounting Procedure (CAP), then the Accounting Principles Board (APB), and now the Financial Accounting Standards Board (FASB). b. The SEC was first granted authority, then the Accounting Principles Board (APB), then the Committee on Accounting Procedure (CAP), and now the Financial Accounting Standards Board (FASB). c. The Accounting Principles Board (APB) was first granted authority, then the SEC, then the Committee on Accounting Procedure (CAP), and now the Financial Accounting Standards Board (FASB). d. The Committee on Accounting Procedure (CAP) was first granted authority, then the SEC, then the Accounting Principles Board (APB), and now the Financial Accounting Standards Board (FASB).

a. The SEC was first granted authority, then the Committee on Accounting Procedure (CAP), then the Accounting Principles Board (APB), and now the Financial Accounting Standards Board (FASB).

Which two of the following statements, about the conclusion section of a memo, are true? Select one or more: a. The conclusion section should summarize the rationale for the alternative you select. b. The conclusion section should include guidance excerpts. c. The conclusion section should bring in additional, new arguments to make the case for the position you select. d. A researcher can choose to include only a single conclusion section, or multiple conclusions (one for each issue) depending on the complexity of the issues.

a. The conclusion section should summarize the rationale for the alternative you select. d. A researcher can choose to include only a single conclusion section, or multiple conclusions (one for each issue) depending on the complexity of the issues.

In 2009, when the Codification was populated with original accounting standards, what happened to these original standards? a. They were superseded and became nonauthoritative. b. They remained equally as authoritative as the Codification. c. They remained authoritative, but now have a lesser degree of authority than the Codification.

a. They were superseded and became nonauthoritative

What are the two key objectives, described in the chapter, for why technical accounting research is performed? Select one or more: a. To account for transactions or items in a manner that is appropriate based on authoritative guidance. b. To submit contemporaneous documentation to the SEC in response to comment letters. c. To determine the proper procedures to be performed during an audit. d. To create documentation describing the research performed and supporting the conclusion reached.

a. To account for transactions or items in a manner that is appropriate based on authoritative guidance. d. To create documentation describing the research performed and supporting the conclusion reached.

The chapter encourages presenters to find ways to make the content resonate with the audience. Two strategies recommended for presenting the facts/background of a case in an engaging way are: Select one or more: a. To include a transaction structure picture that shows the relationships between parties to the transaction b. To include a timeline emphasizing key dates involved in the transaction c. To include clip art pictures that are related to the topic or company's industry d. To include excerpts from the FASB Codification

a. To include a transaction structure picture that shows the relationships between parties to the transaction b. To include a timeline emphasizing key dates involved in the transaction

The book introduces the concept of a guidance sandwich. This means that a. commentary in your own words should precede and follow all guidance excerpts. b. any nonauthoritative guidance cited should be preceded and followed by authoritative excerpts. c. in order to give memo readers context for guidance excerpts, the paragraph in the literature preceding and following your chosen excerpt should also be included in the memo. d. your analysis section should primarily consist of authoritative excerpts; thus, the analysis section should generally start off with an excerpt and conclude with an excerpt.

a. commentary in your own words should precede and follow all guidance excerpts.

Recognition guidance is presented within which section of each Codification topic? a. 15 b. 25 c. 30 d. 40 e. 55

b. 25

A fair value measurement (of an asset or liability) that is required or permitted every period is referred to as which of the following? a. A nonrecurring fair value measurement b. A recurring fair value measurement c. An initial fair value measurement d. A level 1 fair value measurement

b. A recurring fair value measurement

Where should a researcher go first to find guidance on present value measurements? a. ASC 825 (Financial Instruments) b. ASC 820-10 (Fair Value Measurements), Section 55 (Implementation Guidance) c. Concepts Statement No. 7 (CON 7) d. Nonauthoritative resources, such as firm guide books

b. ASC 820-10 (Fair Value Measurements), Section 55 (Implementation Guidance)

Which of the following is the term used today to describe a final accounting standard issued by the FASB? a. FASB Statement b. Accounting Standards Update (ASU) c. Statement of Financial Accounting Standard (SFAS) d. Discussion Paper

b. Accounting Standards Update (ASU)

Which of the following parties might be most likely to request that the FASB take on a project that would result in clarifications of existing GAAP, or additional interpretations of areas that are unclear? a. Investors and analysts b. Audit firms and financial statement preparers c. International standard setters

b. Audit firms and financial statement preparers

The Facts section of an issues memo should do which of the following? a. Provide a brief history of the company and its business. b. Include all relevant facts necessary to understand the transaction and its accounting. c. Summarize the key guidance excerpts that will be cited as support for the accounting position. d. Present the alternative views that will be described in more detail in the memo. e. All of the answers are correct

b. Include all relevant facts necessary to understand the transaction and its accounting.

Standalone selling price is a measurement attribute used within Topic 606 to a. apply sales incentives to customer purchases. b. allocate a single transaction price to multiple performance obligations. c. estimate customer returns. d. determine whether multiple deliverables qualify for separate recognition.

b. allocate a single transaction price to multiple performance obligations.

If authoritative U.S. GAAP is not available for a particular research issue, and the researcher looks to IFRS for similar transactions, the researcher is said to be a. defaulting to IFRS. b. analogizing to IFRS. c. applying the IFRS Framework. d. deferring to IFRS.

b. analogizing to IFRS

Nonauthoritative guidance is a. guidance in the Codification that was issued by standard setters other than the FASB, such as the AICPA and the EITF. b. any source of accounting guidance or practice not included within the FASB Codification (SEC guidance excepted). c. guidance recognized by the AICPA that can be used to support an audit opinion. d. guidance that researchers may choose to cite in lieu of Codification excerpts

b. any source of accounting guidance or practice not included within the FASB Codification (SEC guidance excepted).

This type of accountant may perform accounting research before financial statements are issued in order to review that a company's financial statements are presented fairly in conformity with GAAP. Choose the best answer. a. Corporate accountant b. Auditor c. Regulator d. Investor

b. auditor

The chapter argues that the most effective group presentations are the ones where a. each team member takes ownership and responsibility for the quality of his or her own part. b. each group member believes that he or she is responsible for the quality of the whole presentation, not just his or her own part. c. group members create an outline together then divvy up the slides based on which team member will present each topic. d. the team gets along well and strives for group harmony.

b. each group member believes that he or she is responsible for the quality of the whole presentation, not just his or her own part.

An Accounting Standards Update a. is authoritative, but has less authority than the Codification. It is used to make changes to the Codification. b. is not authoritative. It serves only to update the authoritative Codification. c. is the document issued by the Emerging Issues Task Force. d. includes the Board's basis for conclusions, which then becomes part of the authoritative Codification.

b. is not authoritative. It serves only to update the authoritative Codification.

As discussed in the chapter, the SEC periodically writes comment letters a. to the FASB, to formally document the positions of its appointed observer attending FASB meetings. b. to public companies, requesting additional explanation of a company's financial reporting. c. to registered public accounting firms, describing concerns observed during its inspections of public company audits.

b. to public companies, requesting additional explanation of a company's financial reporting.

Scope guidance within a topic tells you a. how a transaction should be presented in the financial statements. b. whether the guidance in a particular topic applies to a transaction. c. what, when, and how to record an item. d. at what value an item should be recorded.

b. whether the guidance in a particular topic applies to a transaction

Scope guidance within a topic tells you a. how a transaction should be presented in the financial statements. b. whether the guidance in a particular topic applies to a transaction. c. what, when, and how to record an item. d. at what value an item should be recorded.

b. whether the guidance in a particular topic applies to a transaction.

When new guidance (that is, an "Accounting Standards Update") is issued by the FASB, it is added to the Codification and labeled as a. "transitional content." b. "emerging guidance." c. "pending content." d. "newly effective content." e. an "Accounting Standards Update."

c. "pending content."

The FASB is funded primarily by which of the following? a. Private donations b. Sales of publications and Codification access c. Accounting support fees d. The U.S. Congress (via an approved budget)

c. Accounting support fees

Accounting measurement describes which of the following? a. What, when, and how an item should be recorded b. Whether the guidance in a particular topic applies to a given situation c. At what value (i.e., for how much) a financial statement item should be recorded d. How items should be presented on the balance sheet and in financial statement footnotes

c. At what value (i.e., for how much) a financial statement item should be recorded

Ideally, companies with sufficient resources will perform accounting research for a transaction at which time? a. At the time when, or after, a transaction occurs b. After financial statements are issued c. Before a transaction occurs d. All of the other answers are correct

c. Before a transaction occurs

Identify which of the following statements, regarding the Issues section of an issues memo, is/are true. a. All of the researchable questions (or issues) to be addressed in the memo should be listed in this section. b. Each issue should be phrased in the form of a question. c. Both statements are true.

c. Both statements are true.

What two early standard-setters were committees formed by the AICPA? Select one or more: a. Securities and Exchange Commission (SEC) b. Financial Accounting Standards Board (FASB) c. Committee on Accounting Procedure (CAP) d. Accounting Principles Board (APB) e. International Accounting Standards Board (IASB)

c. Committee on Accounting Procedure (CAP) d. Accounting Principles Board (APB)

To browse to guidance on employee pensions, in which "Area" should your search begin? a. Presentation b. Assets c. Expenses d. Broad Transactions

c. Expenses

A group of executives attended a meeting in which the CFO was the attendee with the most senior ranking. When the meeting began, the CFO offered his views on the matter at hand, and the other meeting attendees expressed agreement with his approach. This scenario could be an example of which type of bias? a. Anchoring and adjustment bias b. Hindsight bias c. Group think bias d. Confirmation bias e. Availability bias

c. Group think bias

Which of the following is not a benefit of researching a proposed transaction? a. Researching a proposed transaction allows management to evaluate whether the expected financial statement impacts of the transaction are acceptable. b. Management can use this information to adjust forecasted earnings to reflect the expected impacts of the transaction. c. It allows investors to research a company's choice of accounting methods before the transaction is finalized. d. The accounting team can prepare timely documentation of the expected accounting position. e. The audit team can review the proposed accounting position before the transaction is recorded.

c. It allows investors to research a company's choice of accounting methods before the transaction is finalized.

Before you even begin the research process, the book advocates that researchers begin with a "pre-step." What is this pre-step? a. Inquire of others within the organization about the transaction. b. Document your initial views on the research question. c. Learn about the client's business (industry). d. Perform preliminary research within the FASB Codification.

c. Learn about the client's business (industry).

What measurement attribute generally applies to the subsequent measurement of inventory? a. Market value b. Fair value c. Lower of cost or market d. Historical cost

c. Lower of cost or market

An accountant in this role may perform accounting research in order to understand accounting positions of the companies or industries his/her agency oversees, and these individuals may send comment letters to the extent they question a given position. a. Corporate accountant b. Auditor c. Regulator d. Investor

c. Regulator

Which two of the following statements properly use neutral language? Select one or more: a. The company's accounting is right/wrong. b. The company's accounting is correct/incorrect. c. The company's accounting is supported/not supported by the guidance. d. The company's accounting is consistent/not consistent with the guidance.

c. The company's accounting is supported/not supported by the guidance. d. The company's accounting is consistent/not consistent with the guidance.

Changes in an asset or liability's fair value may be recorded a. in other comprehensive income (OCI) only. b. on the income statement only. c. in income or OCI, depending on the asset or liability. d. neither in income nor in OCI.

c. in income or OCI, depending on the asset or liability.

Generally speaking, a researcher should begin his or her search for measurement guidance a. with CON 5's definitions of measurement attributes. b. within the fair value measurement topic (ASC 820). c. within individual Codification topics, sections 30 and 35. d. within CON 6's definitions of elements.

c. within individual Codification topics, sections 30 and 35.

Based on your understanding of the FASB's Concepts Statements, which of the following statements would you not expect to have come from the Concepts Statements? a. "The primary objective of general purpose financial reporting is to provide information that is useful to users." b. Assets are defined as "probable future economic benefits..." c. Expenses are defined as "outflows or other using up of assets or incurrences of liabilities..." d. "An entity shall initially recognize the financial statement effects of a tax position when it is more likely than not..."

d. "An entity shall initially recognize the financial statement effects of a tax position when it is more likely than not..."

An accounting issues memo may be necessary when a transaction is which of the following? a. Complex b. Judgmental c. Highly material d. All answers are correct

d. All answers are correct

Why use a research process? a. Because in practice, accounting researchers actually apply a similar process b. Because researchers who do not use a research process often have to make several back-and-forth trips to a supervisor to gather additional facts c. Because a thoughtful research process will allow you to carefully identify and evaluate alternatives d. All answers are correct

d. All answers are correct

In some cases, when evaluating the scope of a certain topic, a researcher may also have to refer to which of the following? a. Glossary terms b. Implementation guidance c. Nonauthoritative sources d. All of the answers are correct

d. All of the answers are correct

Recognition guidance is typically addressed in Section 25 of each Codification topic. In addition, what other section(s) within a topic may address recognition-related issues? a. SEC guidance (Section S-25 or S-99) b. Implementation guidance (Section 55) c. Other Presentation Matters (Section 45), which often describes how to record items d. All of the answers are correct

d. All of the answers are correct

A company may review SEC correspondence ("CORRESP") in order to do which of the following? a. View comment letters sent to public companies, and the companies' responses. b. Gain additional insight into how a public company reached its reporting decisions. c. Understand concerns being raised by the SEC in its reviews of public company financial statements. d. All of the answers are correct.

d. All of the answers are correct.

Correct statements about the Codification include which of the following? a. The FASB has designated the Codification as the sole source for its authoritative guidance. b. The Codification became effective in 2009. c. The purpose of the Codification is to simplify research. d. All statements are true.

d. All statements are true

Which of the following search methods does the FASB suggest researchers should use as a starting point when conducting research? (This is also generally the most efficient search method.) a. Keyword/advanced keyword search b. Master Glossary search c. Cross-reference feature d. Browse searches

d. Browse searches

Which of the following is another name for a proposed standard (or a proposed Accounting Standards Update)? a. Discussion Paper b. Preliminary Views document c. Final standard d. Exposure draft

d. Exposure draft

Which of the following is not a suggestion that the author makes for drafting effective emails? a. Re-state the research question. b. Include an excerpt from the authoritative guidance to support your response. c. Describe any assumptions you made in performing the research. d. Limit your use of authoritative guidance to one excerpt.

d. Limit your use of authoritative guidance to one excerpt.

Is all SEC guidance contained within the Codification, and is SEC guidance considered authoritative? a. Yes, all SEC guidance is housed within the Codification; no, it is not considered authoritative. b. Yes, all SEC guidance is housed within the Codification; yes, it is considered authoritative for both public and nonpublic companies. c. No, not all SEC guidance is housed within the Codification; yes, it is considered authoritative for both public and nonpublic companies. d. No, not all SEC guidance is housed within the Codification; yes, it is considered authoritative for public companies only. e. No, not all SEC guidance is housed within the Codification; no, it is not considered authoritative.

d. No, not all SEC guidance is housed within the Codification; yes, it is considered authoritative for public companies only.

Why was the Private Company Council created to advise the FASB? That is, what is the concern this body was created to address? a. The concern that audit standards for private companies are beginning to diverge from audit standards for public companies due to new PCAOB issuances b. The concern that GAAP for private companies is not adequately converged with IFRS for private companies c. The concern that private companies should be able to follow the same standards as governmental entities d. The concern that GAAP is currently too complex and too costly for private companies to apply

d. The concern that GAAP is currently too complex and too costly for private companies to apply

Which of the following is not a strategy for overcoming biases? a. Be aware that biases exist. b. Apply a systematic research process. c. Obtain information and viewpoints from a variety of sources, including those who might disagree with you. d. These are all strategies for overcoming biases.

d. These are all strategies for overcoming biases.

Which of the following is not a reason that a researcher might access pre-Codification standards (such as FASB Statements)? Select one: a. To review grandfathered content b. To read a standard setter's basis for conclusions c. To locate historical guidance d. To understand recently-issued FASB requirements

d. To understand recently-issued FASB requirements

Recognition guidance within a topic tells you: Select one: a. Whether the guidance in this topic applies to a transaction b. How much (at what value) an item should be recorded c. How a transaction should be presented in the financial statements d. What, when and how to record an item

d. What, when and how to record an item

Recognition guidance within a topic tells you a. whether the guidance in this topic applies to a transaction. b. at what value an item should be recorded. c. how a transaction should be presented in the financial statements d. what, when, and how to record an item.

d. what, when, and how to record an item.

Although the chapter focused largely on the FASB's standard-setting activities, other organizations that also periodically revise and update their standards include which of the following? a. The IASB b. The AICPA c. The PCAOB d. The GASB e. All of the answers are correct

e. All of the answers are correct

It may not always be possible to research the accounting for proposed transactions. Research may be required at the time, or after, a transaction is executed if a. the transaction or event could not have been anticipated, such as issues arising from a fire or natural disaster b. the transaction was time-sensitive, and there was not sufficient lead time to research the accounting c. communication broke down between the accounting team and the operations teams in the organization, and the accounting team was not made aware of the proposed transaction d. the preparer has limited resources and therefore only performs research for final transactions. e. All of the other answers are correct

e. All of the other answers are correct

Which of the following statements is true about the analysis section of a memo? Select one: a. In this section, the researcher must relate the guidance to his or her fact pattern. b. This section should include "guidance sandwiches." c. This section should present available alternatives. d. Additional subheaders can be used to organize content within this section. e. All of the statements are true.

e. All of the statements are true.

Within which of the following environments is accounting research performed? a. U.S. public companies b. U.S. private companies c. Governmental entities d. International companies e. All other answers are correct

e. All other answers are correct

The FASB Codification is an aggregation of many, many accounting standards that have been issued over the course of the past century. Which of the following original standards was not used to populate the Codification? a. EITF Abstracts b. FASB Statements and Interpretations c. Accounting Research Bulletins d. AICPA Statements of Position e. GASB Statements

e. GASB Statements

Which of the following is not a consideration that could drive accounting standards to change? a. Preparers may express concern that existing requirements are unclear. b. Standard setters may seek to converge with international standard setters. c. Investors may express concern that existing reporting and disclosure requirements do not provide sufficient information. d. New types of transactions emerge, requiring standard setters to create guidance for those transactions. e. Standard setters may try to move away from bright lines, toward objectives-based guidance. f. All of the considerations could drive accounting standards to change.

f. All of the considerations could drive accounting standards to change.

Which of the following are nonauthoritative sources of guidance for a U.S. accounting issue? a. Basis for conclusions to standards b. AICPA resources c. IFRS d. Peer benchmarking e. SEC comment letters f. Accounting Standards Updates g. All answers are correct h. All except IFRS and Accounting Standards Updates are correct

g. All answers are correct

A gross-receipts tax __________ within the scope of ASC 740 (Income Taxes), because it ___________

is not is not a tax based on income

A(n) __________ subsequent event provides additional evidence about conditions existing at the balance sheet date.

recognized