Conceptual Framework and Accounting Standards Q&A (1) PDF

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CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS Conceptual Framework and Accounting Standards (1-19) Q&A

1. Which of the following correctly relate(s) to the Monetary/ Stable monetary/ Monetary Unit concept? I. assets, liabilities, equity, revenues and expenses should be stated in terms of a unit of measure which is the peso in the Philippines. II. the purchasing power of the peso is stable or constant and that its instability is insignificant and therefore ignored. a. I b. II c. I and II d. None 2. The PFRSs do not apply to a. sole proprietorships. b. partnerships. c. cooperatives. d. non-profit organizations. e. The PFRSs apply to all of these entities. 3. To be relevant, information should have which of the following? a. Verifiability. b. Confirmatory value. c. Understandability. d. Costs and benefits. 4. Entity A’s current year financial statements include the preceding year’s financial statements as comparative information. This is most in keeping with the concept of a. Inter-comparability. b. Intra-comparability. c. Verifiability. d. Faithful representation. 5. This refers to financial statements that are intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs. a. All-purpose financial statements b. General purpose financial statements c. Managerial reports d. Unisex financial statements 6. Which of the following statements is incorrect regarding the purpose of the Conceptual Framework?

a. The Conceptual Framework is intended to provide a foundation for the development of globally acceptable Standards. b. Globally acceptable Standards contribute to economic efficiency by lowering the cost of capital and reducing international reporting costs. c. Globally acceptable Standards reduces the information gap between financial statement users and the reporting entity’s management. d. The Conceptual Framework prescribes the concepts for both general purpose and specific purpose financial reporting. 7. The Conceptual Framework (choose the incorrect statement) a. is not a PFRS. b. 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. is concerned with general purpose financial reporting only. d. prevails over the PFRSs in cases of conflicts. 8. Which of the following is excluded from the scope of the Conceptual Framework? a. The objective of financial reporting. b. Qualitative characteristics of useful financial information. c. The components of a complete set of financial statements and their presentation requirements. d. Definitions, recognition criteria and derecognition of financial statement elements. e. Descriptions of the measurement bases used in financial reporting. 9. 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. 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. c. The objective of general purpose financial reporting forms the foundation of the Conceptual Framework. d. 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 of those resources by the entity’s management. 10.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. 11. Information about the reporting entity’s economic resources, claims against the reporting entity and changes in those resources and claims is referred to in the Conceptual Framework as the a. economic phenomena. b. entity’s return. c. financial performance. d. prospects for future cash flows. 12.Entity A deliberately overstated its liabilities from ₱1M to ₱1.2M. What qualitative characteristic is violated? a. Relevance c. Timeliness b. Faithful representation d. Understandability 13.Two primary users are using the financial information of Entity A. If User #1 concludes that Entity A’s sales has increased while User #2 concludes that it has decreased, Entity A’s financial information is not a. relevant. c. comparable b. faithfully represented. d. verifiable. 14.Entity A is making a materiality judgment. Entity A considers the size of the impact of an item to be material if it exceeds 5% of total assets. What type of materiality assessment is this? a. Quantitative c. Requirement of a Standard b. Qualitative d. Relevance 15.Which of the following is incorrect regarding the objective of general purpose financial statements? a. General purpose financial statements show information on the reporting entity’s assets, liabilities, equity, income and expenses. b. General purpose financial statements are intended to show the value of the reporting entity. c. General purpose financial statements provide information that is useful in assessing the entity’s ability to generate future net cash inflows. d. General purpose financial statements provide information that is useful in assessing the entity’s management stewardship in relation to the use of the entity’s economic resources. 16.Which of the following is least likely to be considered when determining whether an item meets the definition of an asset? a. whether there is a present economic resource, which is a right, that has resulted from past events

b. whether the right has a potential to produce economic benefits, evidenced by at least one circumstance c. whether the entity controls the right d. whether it is probable (more likely than not) that the resource will produce economic benefits 17.The revised definitions of an asset and a liability emphasize that a. an asset is a right, and a liability is an obligation, that has the potential to produce, or cause the transfer of, economic benefits. b. an asset is a controlled resource, and a liability is an obligation, that is expected to cause inflows or outflows of economic benefits. c. an asset is the physical object and the liability is ultimate outflow of economic benefits from settling the obligation. d. All of these are emphasized in the revised definitions. 18.Which of the following is correct when determining the existence of an asset or a liability? a. An asset or a liability exists if the associated right or obligation arises from legal or contractual requirements. b. An asset or a liability exists only if the expected inflows or outflows of economic benefits from the asset or the liability are probable, meaning they are more likely than not to occur. c. An asset or a liability can exist even if its potential to produce, or cause a transfer of, economic benefits is not certain or even likely – what is important is that the right or the obligation exists in the present and that in at least one circumstance it will produce, or cause a transfer of, economic benefits. d. All of these are correct. 19.Control is a necessary element of an asset. Control means a. the entity has the exclusive right over the benefits of an asset, including the ability to prevent others from accessing those benefits. b. that the entity can ensure that the resource will produce economic benefits in all circumstances. c. the entity has the exclusive right over the entire economic resource, and not only a portion of it. d. a legally enforceable right conferred to the entity by a law or other operation of law...