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Intermediate Accounting 15th editon Chapter 1

Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control a company’s operations
False
Financial statements are the principal means through which a company communicates its financial information to those outside it
True
Users of financial reports of a company use the information provided by these reports to make their capital allocation decisions
True
An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling securities and obtaining and granting credit
True
The objective of financial reporting is to report the plans made by a company to improve the productivity of its employees
False
Investors are interested in financial reporting because it provides information that is useful for making decisions
True
Users of financial accounting statements have both coinciding and conflicting needs for information of various types
True
The Securities and Exchange Commission appointed the Committee on Accounting Procedure
False
The passage of a new FASB Accounting Standards Update requires the support of five of the seven board members
False
Statements of Financial Accounting Concepts set forth fundamental objectives and concepts that are used by the FASB in developing future standards of financial accounting and reporting
True
The AICPA created the Accounting Principles Board in 1959
True
The FASB’s Codification creates a new set of GAAP
False
The AICPA’s Code of Professional Conduct requires that members prepare financial statements in accordance with generally accepted accounting principles
True
GAAP is a product of careful logic or empirical findings and is not influenced by political action
False
The Public Company Accounting Oversight Board has oversight and enforcement authority and establishes auditing and independence standards and rules
True
The expectations gap is due to the difference between what the public thinks accountants should do and what accountants think they can do
True
Financial reports in the early 21st century did not provide any information about a company’s soft assets (intangibles)
False
Accounting standards are now less likely to require the recording or disclosure of fair value information
False
U.S. companies that list overseas are required to use International Financial Reporting Standards, issued by the International Accounting Standards Board
False
Ethical issues in financial accounting are governed by the AICPA
False
IFRS includes both International Financial Reporting Standards and International Accounting Standards
True
International Financial Reporting Standards preceded International Accounting Standards
False
The standard-setting structure used by the International Accounting Standards Board is very similar to that used by the Financial Accounting Standards Board
True
The rules-based standards of IFRS are more detailed than the simpler, principles-based standards of U.S. GAAP
False
The International Accounting Standards Board has seven members
False
The internal control standards applicable to Sarbanes-Oxley (SOX) apply only to large public companies listed on U.S. exchanges
True
General-purpose financial statements are the product of
financial accounting
Which of the following is not a user of financial reports
Creditors
Government agencies
Unions
All user of financial reports
The financial statements most frequently provided include all of the following except the
statement of retained earnings
The information provided by financial reporting pertains to
individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers
All the following are differences between financial and managerial accounting in how accounting information is used except to
plan and control company’s operations,
decide whether to invest in the company,
evaluate borrowing capacity to determine the extent of a loan to grant.(all correct)
Which of the following represents a form of communication through financial reporting but not through financial statements
President’s letter
The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization’s operations is called
managerial accounting
How does accounting help the capital allocation process attract investment capital
By providing timely, relevant information
Which of the following helps in determining whether a business thrives
Markets.
Free enterprise.
Competition(all correct)
Which of the following is related to an effective capital allocation
Promoting productivity.
Encouraging innovation.
Providing an efficient market for buying and selling securities(all correct)
Financial statements in the early 2000s provide information related to
hard assets (inventory and plant assets)
Which of the following is not a major challenge facing the accounting profession
Accounting for hard assets
What is the objective of financial reporting
Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors
Primary users for general-purpose financial statements include
both creditors and investors
Which of the following will be of interest to investors in decision-making
Both assessing the company’s ability to generate net cash inflows and assessing management’s ability to protect and enhance the capital provider’s investments
Accrual accounting is used because
it provides a better indication of a company’s ability to generate cash flows than the cash basis
Which perspective is adopted as a part of the objective of general-purpose financial reporting
An entity perspective
Which of the following is a requirement for an accounting principle to be called “generally accepted
An authoritative accounting rule-making body has established it and it has been accepted because of its universal application
A common set of accounting standards and procedures are called
generally accepted accounting principles
Which of the following is a general limitation of “general purpose financial statements
General purpose financial statements may not be the most informative for a specific enterprise
What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States
The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction
What is due process in the context of standard setting at the FASB
The FASB operates in full view of the public.
Public hearings are held on proposed accounting standards.
Interested parties can make their views known(all correct)
Which of the following organizations has been responsible for setting U.S. accounting standards
The Accounting Principles Board.
The Committee on Accounting Procedure.
The Financial Accounting Standards Board(all correct)
Why did the AICPA create the Accounting Principles Board
The previous standard setting organization did not provide a structured set of accounting principles
Which organization was responsible for issuing Accounting Research Bulletins
The Committee on Accounting Procedure
A characteristic of generally accepted accounting principles include
a common set of standards and principles
Characteristics of generally accepted accounting principles include all of the following except
each principle is approved by the SEC
Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight
Due process
The passage of a new FASB Accounting Standards Update requires the support of
four Board members
What is the purpose of Emerging Issues Task Force
Provide a consensus on how to account for new and unusual financial transactions
Which organization is responsible for issuing Emerging Issues Task Force Statements
The FASB
The role of the Securities and Exchange Commission in the formulation of accounting principles can be best described as
sometimes primary and sometimes secondary
The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the
SEC
Companies that are listed on a stock exchange are required to submit their financial statements to the
SEC
The Financial Accounting Standards Board (FASB) was proposed by the
Study Group on establishment of Accounting Principles (Wheat Committee)
Which of the following is true of the Financial Accounting Standards Board
The members of the FASB are appointed by the Financial Accounting Foundation
The Financial Accounting Foundation
oversees the operations of the FASB
The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is
all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions
The Financial Accounting Standards Board employs a “due process” system which
enables interested parties to express their views on issues under consideration
Which of the following is not a publication of the FASB
Accounting Research Bulletins
FASB Technical Bulletins
are not expected to have a significant impact on financial reporting in general and provide guidance when it does not conflict with any broad fundamental accounting principle
The purpose of the Emerging Issues Task Force is to
issue statements which reflect a consensus on how to account for new and unusual financial transactions that need to be resolved quickly
The American Institute of Certified Public Accountants (AICPA) continues to be involved in all of the following except
developing auditing standards for public companies
Which of the following pronouncements were issued by the Accounting Principles Board
APB Opinions
Which of the following organizations has not been instrumental in the development of financial accounting standards in the United States
IASB
Which of the following organizations has not published accounting standards
American Institute of Certified Public Accountants.
Securities and Exchange Commission.
Financial Accounting Standards Board(all correct)
The purpose of Statements of Financial Accounting Concepts is to
form a conceptual framework for solving existing and emerging problems
Members of the Financial Accounting Standards Board are
independent of any other organization
Which of the following is true of generally accepted accounting principles
GAAP includes detailed practices and procedures as well as broad guidelines of general application.
GAAP is influenced by pronouncements of the SEC and IRS.
GAAP changes over time as the nature of the business environment changes(all correct)
The most significant current source of generally accepted accounting principles is the
FASB
Which of the following is not a part of generally accepted accounting principles
The FASB Interpretations
The CAP Accounting Research Bulletins
The APB Opinions(all correct)
Which of the following publications does not qualify as a statement of generally accepted accounting principles
Accounting research studies issued by the AICPA
Rule 203 of the Code of Professional Conduct addresses
financial statements being based on generally accepted accounting principles
What is the purpose of a FASB Staff Position
Provide interpretive guidance
Which of the following is not considered a component of generally accepted accounting principles
Articles published in CPA journals
Financial accounting standard-setting in the United States
can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic
The purpose of the International Accounting Standards Board is to
promote uniform accounting standards among countries of the world
Which of the following is a source of pressure that may influence the accounting standard setting process
Congress.
Lobbyist.
CPA firms(all correct)
What is a possible danger if politics plays too big a role in accounting standard setting
Accounting standards that are not truly generally accepted
What is the “expectations gap”
The difference between what the public thinks the accountant should do and what the accountant thinks they can do
What is not a reason that accounting standards may differ across countries
Language
What would be an advantage of having all countries adopt and follow the same accounting standards
Comparability
Which of the following is an ethical concern of accountants
Earnings manipulation
Authoritative standards for IFRS include
International Financial Reporting Standards and International Accounting Standards only
Which of these statements regarding the IFRS and U.S. GAAP is correct
IFRS is considered to be “principles-based” and less detailed than U.S. GAAP
The IASB’s standard-setting structure includes all of the following except
the Standards Comparison Committee
Which of the following organizations have committed to develop high-quality, compatible accounting standards that could be used for domestic and cross-border financial reporting
The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB)
Which of the following organizations is not among the four international standard-setting organizations
The Financial Executives Institute (FEI)
Which of the following organizations selects members for the IASB
The International Accounting Standards Committee Foundation
The IASB consists of _________ part-time members
two
The purpose of the International Accounting Standards Board is to
develop a single set of high-quality financial reporting standards

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