The going-concern postulate states that unless there is evidence to the contrary, it is
assumed that the firm will continue indefinitely.
The current operating approach has led to the concept of comprehensive income.
Partial allocation is an example of flexible uniformity.
All empirical evidence supports the all-inclusive income concept.
A major problem with SFAS No. 114 is that it applies only to creditors, while debtors
are still governed by SFAS No. 15.
The Chartered Financial Analysts’ business reporting model for equity investors shows
a preference for relevance over reliability.
Whenever possible, flexibility should be used in formulating accounting policy.
When the business is viewed in the context of accounting as well as in its legal form, it
is clear that the entity is identical to its owners.
Professional accounting societies first arose in the United Kingdom in the middle of the
19th century.
British standard-setters blazed the trail of accounting regulation being centered in the
private sector.
APB Statement No. 4 acknowledges a conflict between the relevance and reliability
objectives.
The concept of uniformity appears to overlap with consistency.
Many continental model countries, such as France and Germany, have viewed
harmonization as an opportunity to coordinate their accounting standards with those of
the United States.
Recognition of a past event is sometimes governed by whether a “one-event view” or a
“two-event view” is held.
The U.S. dollar orientation approach to the translation of foreign operations requires an
enterprise to account for foreign operations as if those operations actually occurred in
U.S. dollars.
Legal remedies available to lessors in the event of lessee default treat leases like
unilaterally unperformed executory contracts.
One of the major arguments for lease capitalization was verifiability.
Overproduction of accounting information, or the problem of standards overload, has
the greatest effect on large, publicly traded companies.
The statement of financial position is a special case of the more general cash flow
statement.
In SFAS No. 153, when exchanged assets have significantly different cash flows, the
new asset is recorded at book value of the traded in asset.
Which one of the following types of liabilities represents a duty not contractually
present but which may nevertheless exist due to ethical principles of fairness?
a. Deferred credits
b. Constructive obligations
c. Equitable obligations
d. Contingent liabilities
The IAS designation for the preferred accounting treatment is referred to as:
a. Benchmarking
b. Conformity
c. Reconciliation
d. Convergence
Which of the following is not a true statement regarding ARB 38?
a. It was the first lease accounting standard.
b. It recommended capitalization for leases that were in substance installment
purchases.
c. It was most applicable to leases that were de facto conditional sales agreements.
d. Noncancellability was introduced as a precondition for capitalization.
Major complaints aimed at the FASB’s standard setting process include:
a. The cost of preparing standards is too high.
b. Some standards are very difficult to understand.
c. Both a and b
d. None of the above
In the cash flow statement, cash is defined as:
a. Quick assets
b. Literal cash on hand or on demand deposit, plus cash equivalents.
c. Literal cash on hand or on demand deposit, plus marketable securities.
d. All of the above
Which of the following is not true of accounting allocations?
a. Examples include depreciation and cost of good sold
b. They are arbitrary
c. No method can be proved superior to another method
d. They are not useful in providing financial information
When the FASB considers the effects of an accounting standard:
a. The only costs it considers are auditing costs.
b. It considers benefits primarily in terms of the information needs of the stock market.
c. It is not concerned with producer costs.
d. It is primarily concerned with the effects of the standard on small or nonpublicly
listed firms.
Which of the following was the first accounting standard to address lessor accounting?
a. ARB 38 in 1949
b. APB Opinion No. 7 in 1966
c. APB Opinion No. 3 in 1973
d. SFAS No. 13 in 1976
Accounting exposure is:
a. The exposure to exchange gains and losses resulting from translating
U.S.-dollar-denominated financial statements into foreign denominations.
b. The exposure to exchange gains and losses resulting from translating
foreign-currency-denominated financial statements into U.S. dollars.
c. The exposure to cash flow changes resulting from dealings in foreign-denominated
transactions and commitments.
d. A result of the need to use more U.S. dollars to settle a foreign-currency-denominated
debt.
Which of the following is not true regarding SFAC No. 7
a. SFAC No. 7 requires that estimated future cash flows be used for asset measurement
in certain circumstances.
b. SFAC No. 7 concerns specific measurement issues rather than conceptual-type
issues.
c. SFAC No. 7 applies only to initial recognition and not subsequent revaluations.
d. SFAC No. 7 is divided into two parts: asset measurement and income measurement.
The focus of accounting regulation is on:
a. Mandatory reporting.
b. Improving the quality of reported information.
c. Standards overload.
d. Underproduction of accounting information.
Which of the following standards is related to measurement theory?
a. Quantifiability
b. Freedom from bias
c. Usefulness
d. Objectivity
Which of the following does not apply to a codificational system such as accounting
standards?
a. It is pragmatic because maximizing the standards is impossible.
b. Outputs are evaluated on the basis of whether they work correctly.
c. Outputs are evaluated on the basis of whether they provide information to users at a
reasonable cost.
d. Outputs are correct in terms of deductive logic.
Which of the following methods of accounting for business combinations has been
viewed as an important motivation for business combinations?
a. Pooling of interests
b. The purchase method
c. The new entity approach
d. Proportionate consolidation
Which of the following are the basic postulates underlying historical costing?
a. Going Concern, Time Period, Market Prices, Monetary Unit
b. Objectivity, Time Period, Accounting Entity, Monetary Unit
c. Going Concern, Time Period, Accounting Entity, Monetary Unit
d. Going Concern, Time Period, Financial Statements, Monetary Unit
Which of the following is true regarding the Accounting Standards Board (ASB) in the
UK?
a. The US has a greater influence on the standard setting apparatus in the UK than does
the European Union.
b. ASB board members serve on a part-time basis without salary.
c. The Emerging Issues Task Force (EITF) serves both the US an UK standards-setting
boards.
d. The ASB issues accounting standards on its own authority.
In a scientific approach to accounting:
a. A great deal of latitude is allowed in measurements.
b. There is a low degree of objectivity.
c. The intention is to provide information useful for either predictive or assessment
purposes.
d. The straight-line method of depreciation would always be used.
Which of the following is not a possible treatment of a capital lease?
a. The lessee treats lease payments as periodic expenses.
b. The lessor treats the lease like a sale with vendor financing.
c. The lease is treated by a third party like a loan with income realized through implicit
interest in each lease payment.
d. The lessee treats the lease as a purchase with debt financing.
Which of the following is not a negative consequence of regulating accounting?
a. A wealth transfer from nonusers to users of accounting information.
b. The imposition of disclosure costs on the users of financial information.
c. A potential overallocation of social resources to the production of free, publicly
available accounting information.
d. Benefits are received by the users of free accounting information while nonusers
implicitly incur the production costs.
Which of the following is not true regarding SFAS No. 128?
a. Users can now comprehend the effect upon EPS of the full amount of dilution
without the presence of the artificial and confusing primary earnings per share
calculation.
b. It brought the United States into alignment with virtually all other nations in terms of
EPS requirements.
c. The elimination of primary earnings per share is a case of more information leading
to more usefulness.
d. The FASB and the International Accounting Standards Committee cooperated on the
project together.
Which of the following does not accurately characterize the IFAC?
a. It produces international financial reporting standards.
b. Its guidelines cannot be imposed on any member organization or nation.
c. Its board produces international standards for ethics, education and public sector
accounting.
d. It produces international standards for auditing and assurance.
Which one of the following measurement bases applies to receivables?
a. Historical cost
b. An approximation of net realizable value
c. Selling price through factoring
d. Discounted present value
Which of the following is not a true statement regarding SFAS No. 94?
a. SFAS No. 94 rejected the exclusionary arguments of ARB 51 and ARB 43.
b. SFAS No. 94 requires all majority-owned companies to be consolidated except when
control is only temporary or if the majority owner does not have effective control.
c. SFAS No. 94 says that neither legal reorganization nor bankruptcy is an instance of
noncontrol by a majority owner.
d. There is some evidence that the FASB was attempting to “level the playing field” in
SFAS No. 94 by requiring companies to provide more information to financial
statement users who might not have been aware of debt levels carried by
unconsolidated subsidiaries.
Which of the following is not a finding or conclusion of the research study by Ou and
Penman that used traditional accounting measures to predict whether a company’s
income would increase or decrease?
a. The researchers were unable to describe the following year earnings changes
correctly in most cases.
b. Markets are not as efficient as efficient-market advocates would like to believe.
c. Better accounting standards might improve the predictive ability of accounting
information.
d. Fundamental analysis is still important for investment purposes.
Under the current-operating concept, increases in equity from peripheral or incidental
transactions (transactions other than sales of products, merchandise, or services) are
referred to as:
a. Gains.
b. Revenue.
c. Comprehensive income.
d. Accruals.