Prior to SFAS No. 106, OPEB had been handled on a cash basis of accounting.
The overriding message of SATTA is that current-cost should be accepted as the
dominate valuation system.
Postulates are generally defined as basic assumptions that cannot be verified.
Deferred taxes were viewed as liabilities under APB Opinion No.
The time period idea is somewhat artificial because it creates definite segments out of
what is a continuing process.
The comprehensive income approach required in SFAS No. 130 favors articulation.
For all defined contribution plans, funding is shared by the employer and employee.
ARS 1 and ARS 4 represent a milestone in the attempt to provide a unified theoretical
underpinning for financial accounting rules by the APB.
A general price index is broadly constructed for ascertaining the change in prices for all
goods and services.
The AICPA has developed an electronic filing of financial data called EDGAR.
Backdating stock options appears to be an illegal conversion of assets belonging to
shareholders to members of management.
A current value income system does not include purchasing power gains and losses as
an element of income.
The asset-liability approach complements the expense-liability approach because the
former is applicable to the balance sheet and the latter is applicable to the income
statement.
Current cost represents an attempt to derive the specific value or worth for a particular
point or period in time of assets, liabilities, expenses, and revenues.
Research on the smoothing of year-to-year income suggests that operating income is
better predicted by operating rather than all-inclusive income.
Information economics research is usually inductive in nature.
Membership in defined benefit plans is declining relative to membership in defined
contribution plans.
Flexibility is an approach to the uniformity problem.
The efficient-markets hypothesis states that the return of a security is based on its risk.
Which of the following directly affects consolidated cash flows?
a. Accounting exposure
b. Economic exposure
c. Both accounting exposure and economic exposure
d. Neither accounting exposure nor economic exposure
Accounting for inventory and cost of goods sold and for depreciation is an example of:
a. Elastic uniformity.
b. Finite uniformity.
c. Flexibility.
d. Rigid uniformity.
Respond to the following:
a. When is revenue generally recognized, and what are three other alternative points in
time for recognizing revenue?
b. When is each alternative revenue recognition method appropriate and why have these
methods evolved?
c. What is the primary criterion for revenue recognition applied in practice, and what
attributes must be measurable before revenue is recognized.
Which of the following is a true statement?
a. Under the articulation approach, all accounting transactions are reported on the
income statement.
b. Because income is a subclassification of retained earnings, the income statement and
balance sheet articulate.
c. Under articulation, adjustments to the income of prior years are reflected on the
current year income statement.
d. All transactions can be easily categorized using the current accounting classification
system.
Which of the following ranks below annual reports on surveys that ask investors to
weigh the importance of different types of investment information?
a. Information from company reports
b. Information about general economic conditions
c. Company announcements on products and markets
d. None of the above rank below annual reports
Identify the following organizations and describe the role each plays in the drive toward
harmonization:
Which of the following was a controversial issue faced by the Accounting Principles
Board (APB)?
a. The investment tax credit
b. Income tax allocation
c. Business combinations and goodwill
d. All of the above
Which of the following describes ‘deprival value’?
a. It is a not a good measurement of fair value.
b. It is the higher of exit value and replacement cost.
c. It measures the opportunity cost to the enterprise of doing without the asset.
d. It is the lower of exit value and or present value of future cash flow.
The effect of an externality is that:
a. Production of a public good equals market demand.
b. Production of a private good equals market demand.
c. True market demand for public goods may be determined by the number of
consumers that pay for the goods.
d. The producer of a public good has a limited incentive to produce it because all
consumers cannot be charged for the good.
Which of the following theories assumes that the owners and the firm are virtually
identical?
a. Residual equity theory
b. Proprietary theory
c. Entity theory
d. Commander theory
Which of the following statements is not supported by empirical evidence from capital
market research?
a. Accounting earnings appear to have information content and to affect security prices.
b. Alternative accounting policies with no apparent direct or indirect cash flow
consequences to the firm do not seem to affect security prices.
c. There are no incentives to choose certain alternative accounting policies over others
because there are never cash consequences.
d. Accounting-based risk measures correlate with market risk measures, suggesting that
accounting numbers are useful for risk assessment.
Which of the following qualities are impaired under historical costing?
a. Additivity
b. Predictive value
c. Representational faithfulness
d. All of the above
Which of the following are possible sources of abnormal earnings?
a. Recognizing the positive excess present value above the cost of a project on the
balance sheet
b. The use of current values in reporting marketable securities
c. Conservative matching and recognition procedures under historical costing
d. All of the above