Conceptual Framework and Accounting Standards PDF

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CFAS ASSESSMENTIDENTIFICATION The standard-setting body who issues the International Financial Reporting Standards INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) The standard-setting organization who issues the U. GAAP FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) The process of identifying, measurin...

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CFAS ASSESSMENT IDENTIFICATION 1. The standard-setting body who issues the International Financial Reporting Standards INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) 2. The standard-setting organization who issues the U.S. GAAP FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) 3. The process of identifying, measuring, and communicating economic information to permit informed judgment and decision by users of the information. ACCOUNTING 4. This was created to issue implementing guidelines on PFRS. PHILIPPINE INTERPRETATION COMMITTEE (PIC) 5. The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash OPERATING CYCLE/NORMAL OPERATING CYCLE 6. The financial report that shows the reporting entity’s economic resources and claims STATEMENT OF FINANCIAL POSITION 7. The financial report that shows the changes due to events and transactions other than financial performance such as the issue of equity instruments and distributions of cash or other assets to shareholders STATEMENT OF CHANGES IN EQUITY 8. This is used when assets are recorded at the amount of cash or cash equivalents or the fair value of the consideration given to acquire them at the time of their acquisition. HISTORICAL COST 9. Refers to the ability of the business to raise cash to meet unexpected cash requirements. LIQUIDITY 10. Those responsible for the preparation and presentation of financial statements. REPORTING ENTITY 11. The standard that sets out the requirements for the presentation of the cash flow statement and related disclosures. INTERNATIONAL ACCOUNTING STANDARD 7 12. Portray the financial effects of transactions and other events by grouping them into broad classes according to their economic characteristics. FINANCIAL STATEMENTS

14. One of its recognition criteria is that it is probable that the future economic events will flow to the enterprise. ASSET 15. Under this concept a profit is earned only if the physical productive capacity (or operating capability) of the entity (or the resources or funds needed to achieve that capacity) at the end of the period exceeds the physical productive capacity at the beginning of the period, after excluding any distributions to, and contributions from, owners during the period. PHYSICAL CAPITAL MAINTENANCE -------------------------------------------------------------------------------FILL IN THE BLANKS 1. _______________ provide financial reporting information to a wide variety of users. GENERAL-PURPOSE FINANCIAL STATEMENTS 2. As part of the objective of general-purpose financial reporting, an _______________ is adopted. This means that companies are viewed as separate and distinct from their owners. ENTITY PERSPECTIVE 3. Accounting standards set out the recognition, _______________, presentation and _______________ requirements of transactions and events that are important in financial statements. MEASUREMENT, DISCLOSURE 4. The creation of FRSC in 2004 replaced the _______________. ACCOUNTING STANDARDS COUNCIL (ASC) 5. The objective of the _______________ is to establish generally accepted accounting principles in the Philippines. FINANCIAL REPORTING STANDARDS COUNCIL (FRSC) 6. _______________ sets out the concepts that underlie the preparation and presentation of financial statements for external users. CONCEPTUAL FRAMEWORK 7. If there are any conflict in the framework and IFRS, the _______________ prevails. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) 8. _______________ is a resource controlled by the enterprise as a result of past events and from which future economic events are expected to flow to the enterprise. ASSET 9. _______________ are decreases in economic benefits during the accounting period in the form of outflows or

13. Result if an asset is sold more than book value. GAIN / GAIN ON DISPOSAL / GAIN ON SALE *Income- encompasses both revenue and gain inflow of economic resources. Revenue + gain = Income Revenue- came from normal course of business Gain- came from incidental or peripheral transaction, not normal course of business

depletions of assets or incurrence of liabilities that result in decreases in equity other than those relating to distributions to equity participants. EXPENSES

10. The conceptual framework specifically mentions one underlying assumption, namely, _______________.

10. Requires consideration of the cost and value of information

GOING CONCERN ASSUMPTION

COST EFFECTIVENESS

11. The four sectors of accountancy under PICPA are: _______________, _______________, _______________, _______________.

11. The process of admitting information into financial statements

PUBLIC PRACTICE, COMMERCE AND INDUSTRY, EDUCATION AND GOVERNMENT 12. One constraint on useful financial reporting is that costs should be justified by the _______________ of the reported financial information.

RECOGNITION 12. An entity reports separately both assets and liabilities, and income and expenses OFFSETTING 13. Information is useful in determining the

BENEFITS

PREDICTIVE VALUE

13. Assets that are carried at the amount of cash or cash equivalents that would have to be paid if the same or an equivalent asset was acquired currently is measured using the _______________.

14. Effects of transactions on an entity’s economic resources and claims are recognized in the periods in which those effects occur, even if the resulting cash receipts and payments occur in a different period

CURRENT COST

ACCRUAL BASIS FOR ACCOUNTING

14. Under the _______________ approach, investment must be recovered before a company can have income.

15. It requires that users have some knowledge of the complex economic activities of enterprises, the accounting process, and the technical terminology in the statements.

CAPITAL RECOVERY / CAPITAL MAINTENANCE / RETURN ON INITIAL INVESTMENT

UNDERSTANDABILITY

15. The objective of PAS 1 is to prescribe the basis for presentation of general-purpose financial statements in order to ensure _______________.

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COMPARABILITY

A. IASB Due Process

SEQUENCING

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1 Topics are identified and placed on IASB’s agenda.

MATCHING TYPE

2 All comments received on discussion document and exposure draft are considered.

1. Concerns the relative size of an item and its effect on decisions. MATERIALITY 2. Information confirms expectations FEEDBACK VALUE 3. Important for making inter-firm comparisons. COMPARABILITY 4. Applying the same accounting practices over time.

3 An exposure draft, which is IASB’s main vehicle for consulting the public, is published for public comment. 4 After comments on the first exposure draft have been affected, the IASB considers whether to publish its revised proposals for another round of comments. 5 After the due process is completed, all outstanding issues are resolved, and the IASB members have balloted in favor of publication, the IFRS is issued. B. FRSC Due Process

CONSISTENCY

1 Consideration of pronouncement of IASB;

5. Implies consensus among different measures.

2 An exposure draft approved by a majority of the FRSC members for comments (comment period 60 – 30 days)

VERIFIABILITY 6. A complete set of financial statements (including comparative information) should be presented at least annually FREQUENCY OF REPORTING 7. Information is available prior to the decisions. TIMELINESS

3 Consideration of all comments received within the comment period and, when appropriate, preparing a comment letter to the IASB; 4 Approval of a standard or an interpretation by a majority of the FRSC members.

8. Pertinent to the decision at hand. RELEVANCE 9. Along with relevance, a fundamental qualitative characteristic FAITHFUL REPRESENTATION

TRUE OR FALSE

MULTIPLE CHOICE

1. The principal difference between two concepts of capital maintenance is the treatment of the effects of changes in the prices of assets and liability of the entity.

1. According to the Preface to International Financial Reporting Standards, which of the following are objectives of the IASB?

TRUE

I. To harmonize financial reporting between IFRS and US GAAP and European – (DAPAT WORLD) II. To work actively with national standard setters III. To promote the use and strict application of financial accounting standards

2. The selection of the appropriate concept of capital by an entity should be based on the needs of the users of its financial statements. TRUE 3. The concept of capital maintenance chosen by an entity shall determine the accounting model used in the preparation of its financial statements. FALSE, BOTH MEASUREMENT BASES AND CONCEPT OF CAPOTAL MAINTENANCE 4. The Conceptual Framework serves as a guide in developing future financial reporting standards and in reviewing existing ones. TRUE 5. The Conceptual Framework is a source of guidance for determining an accounting treatment where a standard does not provide specific guidance. TRUE 6. The Conceptual Framework does not in any was assist prepares of financial statements in applying PFRS and in dealing with topics that have yet to form the subject of PFRS. FALSE 7. The Conceptual Framework is not a PFRS, and nothing in it overrides any specific PFRS, including PFRS that is in some respect in conflict with the Conceptual Framework. TRUE 8. The GPFS show the results of the stewardship of the management for the resources entrusted to it by the capital providers. TRUE 9. The GPFS are prepared at least annually and are directed to both the common and specific information needs of a wide range of statement users. FALSE 10. The GPFS provide information about the financial position, performance and cash flows of an enterprise that is useful to a wide range of users in making economic decisions. TRUE

A. I and II B. I and III C. II and III D. I, II and III 2. Which of the following are parts of the “due process” of the IASB in issuing a new International Financial Reporting Standard? I. Establishing an advisory committee to give advice II. Developing and publishing a discussion document for public comment III. Issuance of an interpretation as authoritative guidance – DUE PROCESS OF IFRS INTERPRETATION COMMITTEE IV. Reviewing compliance and enforcement procedures V. Issuance of the final standard with number and title A. I, II and III only B. I, II and V only C. I, II, III & IV only D. I, II, III, IV & V 3. Which of the following bodies is responsible for reviewing accounting issues that are likely to receive divergent or unacceptable treatment in the absence of authoritative guidance, whit a view to reaching consensus as to the appropriate accounting treatment? A. Standards Advisory Council (SAC) B. International Accounting Standards Board (IASB) C. International Financial Reporting Interpretations Committee (IFRIC) D. International Accounting Standards Committee Foundation (IASC Foundation) 4. Which of the following statements about international accounting standards is true? A. Accounting professionals in the USA consider US GAAP superior to IAS and has no intention to adopt International Accounting Standards. – MAY INTENTION B. The IASB is able to enforce its standards by prohibiting the listing of companies which do not comply on stock exchanges which sell internationally. - ENCOURAGE C. The International Accounting Standards Board (IASB) was established with the purpose of narrowing the range of divergence in accounting standards throughout the world. D. Legal and psychological hurdles to achieving common reporting standards will be fully overcome by the year 2012, the time frame set for convergence between IAS and US GAAP. – CURRENTLY CHANGING, CONTINUOUS PROCESS

5. Which of the following bodies report to the IFRS Foundation? A. The IASB and AASB. B. The IASB and the FASB. C. The IASB and the IFRS Advisory Council. D. The IASB, AASB, and the IFRS Advisory Council.

13. RA 9298 is officially known as 6. Which body appoints the members of International Accounting Standards Board (IASB) that make the present IFRS? A. IFRS Foundation. B. IFRS Advisory Council. C. International Accounting Standards Committee. D. International Financial Reporting Interpretations Committee. 7. Financial accounting standard-setting A. is based solely on research and empirical findings. – MAY PUBLIC DISCUSSION B. is a legalistic process based on rules promulgated by governmental agencies. – IFRS FOUNDATION C. is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable.MAJORITY OF IASB MEMBERS D. 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. 8. The “due process” system in developing financial reporting standards A. is an efficient system for collecting dues from members. B. identifies the accounting issues that are the most important. C. enables interested parties to express their views on issues under consideration. D. requires that all accountants must receive a copy of financial accounting standards. 9. What is due process in the context of standard-setting at the IASB? A. IASB operates in full view of the public. B. Interested parties can make their views known. C. Public hearings are held on proposed accounting standards. D. All of these. 10. What is the chronological order in the evaluation of a typical standard? A. Discussion paper, Exposure draft and Standard. B. Exposure draft, Discussion paper and Standard. C. Exposure draft, Standard and Discussion paper. D. Standard, Discussion paper, and Exposure draft. 11. The IASB declared that the merits of proposed standards are assessed A. from a position of neutrality. B. from a position of materiality. C. based on arguments of lobbyist. D. based on possible impact on behavior. 12. Under Philippine Financial Reporting Standards A. the cash basis of accounting is accepted. – ACCRUAL BASIS OF ACCOUNTING B. events are recorded in the period in which the event

A. The Revised Accountancy Act. B. The Revised Accountancy Law. C. The Philippine Accountancy Act of 2004. D. The Accountancy Law of the Philippines, 2007. 14. Under Section 5 of RA 9298, who shall appoint the members of the Professional Regulatory Board of Accountancy? A. The chairman of the Board of Accountancy. B. The president of the Republic of the Philippines. C. The chairperson of Professional Regulations Commission. D. The president of Philippine Institute of Certified Public Accountants. 15. The following statements relate to the Board of Accountancy. Select the incorrect statement: A. The Board consists of a Chairman and six members. B. The chairman and members of the Board are appointed by the President of the Philippines upon recommendation of the Professional Regulation Commission. C. The Professional Regulation Commission may remove from the Board of Accountancy, any member whose certificate to practice has been revoked or suspended. – ONLY PRESIDENT HAS THE POWER TO REMOVE A MEMBER D. All sectors of accountancy practice shall as much as possible be equitably represented in the Board.

16. Which of the following is not an economic entity? A. SM Group of Companies. B. Lions Club International, a civic organization. C. ABS-CBN Foundation, a charitable institution. D. Chris James, a Quezon City resident who owns a chain of beauty salons. 17. This accounting objective emphasizes the importance of the Income Statement as it is geared toward proper income or performance determination of the enterprise. A. Entity theory. B. Fund theory C. Proprietary theory. D. Residual equity theory. 18. Which of the following is not a description or a function of the Financial Reporting Standards Council (FRSC)? A. It establishes generally accepted accounting principles in the Philippines. B. It receives financial support principally from the Professional Regulations Commission (PRC). C. It is the successor of Accounting Standards Council (ASC) and the creator of Philippine Interpretations Committee (PIC). D. It assists the Professional Regulatory Board of Accountancy (BOA) in carrying out its power and function to promulgate accounting standards in the Philippines....