Unused tax credits may generate deferred tax assets.
In the United States, the term ‘present fairly’ in opinions of American auditing firms is
the same as the ‘true and fair view’ of international financial reporting.
A basic issue with lessor capitalization is symmetry with lessee accounting.
Inductive research can be useful in the accounting policy-making process in which
deductive reasoning helps to determine rules that are to be prescribed.
Entry value refers to replacement cost in markets in which the asset, liability, or
expense ordinarily acquired.
The key imperative postulate in ARS 1 appears to be stability of the monetary unit.
IAS 12 classifies deferred tax accounts as either current or noncurrent, depending on
the account to which they pertain. .
Return on investment is the most-used summary indicator to date.
SATTA expressed the opinion that choice among accounting theories could not be made
at the time because of the diversity of users and their presumably different objectives
and information needs.
The need for information on a timely basis may conflict with cost constraints in some
situations.
There is a movement in accounting policy toward fair or current values on the balance
sheet.
The normative nature of the decision-model approach has led to criticism that this
method is non-scientific.
The relevant circumstance in determining the reporting method for nonconsolidated
intercorporate equity investments is effective control.
Accounting may be called ‘the language of business.’
Which of the following is not a true statement regarding harmonization of accounting
standards?
a. Harmonization refers to the degree of coordination or similarity among the various
sets of national accounting standards and methods and the formats of financial
reporting.
b. Among the factors underlying the desire for harmonization is the rise in importance
of the multinational firm.
c. The issue of harmonization is closely tied to the efforts of the IASB as well as
activities of the EU.
d. 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.
Which of the following is a possible reason why security prices were found to respond
to changes from pooling to purchase accounting for combinations?
a. A change from pooling to purchase accounting does not affect cash flow
b. Differences between purchase and pooling accounting affect only book income
c. The change could have affected dividend distribution because of debt covenants
d. Income would normally be higher under purchase accounting than pooling
Which of the following is not true related to OPEBs?
a. Explicit health care trending makes OPEB accounting somewhat similar to the
projected benefit obligation approach to pensions.
b. Housing subsidies may be included in OPEBs.
c. SFAS No. 106 requires recognition of OPEB costs and obligations.
d. Prior to SFAS No.106, OPEBs were handled on an accrual basis of accounting.
Which of the following accurately refers to SFAS No. 157?
a. It is an income statement oriented standard.
b. It requires that unrealized monetary holding gains be included in operating income.
c. Assets are valued from ‘in-use’ and in-exchange’ perspectives.
d. It requires that purchasing power gains and losses be included in other
comprehensive income.
Which of the following represents the principal theoretical issue underlying quarterly
data?
a. Whether an interim period should be viewed as a separate period standing on its own
b. Whether an interim period report should include balance sheet and cash flow
statements
c. Whether quarterly earnings should be disaggregated by segments in terms of
revenues, profit or loss, and segment assets
d. Whether interim reports should include income statement data and basic and fully
diluted earnings per share numbers
Which of the following is the date that management commits itself to a formal plan to
dispose of a business segment?
a. The measurement date
b. The disposal date
c. The assessment date
d. The transfer date
Which of the following documents stated fundamental concepts of financial reporting
that would serve as a foundation for the opinions of the APB?
a. “Objectives of Financial Statements” (Trueblood Committee Report)
b. “Basic Concepts and Accounting Principles Underlying Financial Statements of
Business Enterprises” (APB Statement 4)
c. “A Statement of Basic Accounting Theory” (ASOBAT)
d. “Statement of Accounting Theory and Theory Acceptance” (SATTA)
Which of the following is not a problem of APB Statement 4 mentioned in the text?
a. It is questionable whether the objectives can be implemented by means of the various
principles derived from the existing body of accounting.
b. It contains a loosely worded set of definitions.
c. It attempts to be all things to all people.
d. It does not state important evolutionary changes that had begun to occur.
Which of the following is not a true statement?
a. The cash flow statement superceded the previously required statement of changes in
financial position.
b. The cash flow statement is the statement of financial position with funds defined as
cash.
c. The statement of financial position is a special case of the more general cash flow
statement.
d. Inclusion of a cash flow statement is mandatory.
Which of the following documents contained a definition of accounting that fortified
the perception of the accountant as a learned professional whose presentation must be
accepted by those who do not have his qualifications and credentials?
a. “Statement of Accounting Theory and Theory Acceptance” (SATTA)
b. “A Statement of Basic Accounting Theory” (ASOBAT)
c. “Basic Concepts and Accounting Principles Underlying Financial Statements of
Business Enterprises” (APB Statement 4)
d. “Accounting Terminology Bulletin No. 1”
Which of the following best describes “comprehensive income”?
a. Comprehensive income is the amount resulting from the deduction from revenues, or
from operating revenues, of cost of goods sold, other expenses, and losses.
b. Comprehensive income is the excess (deficit) of revenue over expenses for an
accounting period.
c. Comprehensive income is the change in equity of an entity during a period of
transactions and other events and circumstances, from nonowner sources.
d. Comprehensive income is the change in equity of an entity during a period of
transactions and other events and circumstances, from owner and nonowner sources.
SFAS No. 130 allows all but which of the following regarding comprehensive income?
a. Reporting comprehensive income in a combined statement of financial performance
b. Reporting comprehensive income in a separate statement of comprehensive income
which would begin with net income
c. Reporting comprehensive income within a statement of changes in equity
d. Not reporting comprehensive income
The statement of changes in financial position reported on:
a. Changes in current assets and current liabilities.
b. Changes in assets.
c. Changes in assets, liabilities, and owners’ equity account balances
d. Changes in working capital
Which of the following is not listed by Fields, Lys, and Vincent as a possible reason
underlying management choice?
a. Minimizing agency cost
b. Comparability
c. Signaling
d. Influencing outside parties
Which of the following is true regarding SFAS No. 144?
a. SFAS No. 144 changed the basic measurement rules of SFAS No. 121.
b. SFAS No. 144 converted goodwill into a nonamortizable asset.
c. Under SFAS No. 144, when several assets constitute a productive unit but the assets
have different lives, a discounted cash flow analysis is performed.
d. SFAS 144 supersedes Opinion No. 30 in terms of the valuation of assets in
discontinued segments.
Which of the following is true about the Statement of Cash Flows (SCF)?
a. The SCF is more subject to manipulation than the income statement.
b. Cash flow from financing activities is considered to be the most important part of the
SCF.
c. Classification rules prevent manipulation of cash flows from operating activities on
the SCF.
d. Flexibility in applying classification rules on the SCF allows companies in the same
industry to give vastly different perspectives.
Which of the following is not part of the conceptual framework?
a. Conservatism
b. Economic consequences
c. Consistency
d. None of the above are in the conceptual framework
Which of the following standards is related to the qualitative characteristic of
neutrality?
a. Quantifiability
b. Freedom from bias
c. Usefulness
d. Objectivity
The objective of information theory analysis is:
a. To determine how optimal contractual arrangement incentives and risk sharing can be
negotiated.
b. To determine appropriate alternatives to accrual accounting.
c. To use inductive research techniques to test hypotheses regarding information
usefulness.
d. To find alternatives to agency theory assumptions.
For which measurement scale must the change in the attribute measured among
assigned numbers be equal and the zero point imply the absence of the attribute
measured?
a. Interval scale
b. Ratio scale
c. Ordinal scale
d. Both a and b
Which of the following is a measure of predictive ability?
a. Objectivity
b. Bias
c. Timeliness
d. Productivity
Give at least three examples of how accounting numbers may affect social reality.
Explain how assets and liabilities should be classified on the balance sheet. What are
the problems with this classification method?
Explain how a firm might use a special purpose entity (SPE) to subvert the
standard-setting process.
Discuss the difference between direct measurement and indirect measurement. Give
examples of each in an accounting context.
Discuss Ronen’s solution to the problem of companies ‘capturing’ auditors as a result of
management consulting contracts between auditor and auditee.
Identify and describe the three categories of cash flows reported on the statement of
cash flows. What problems have been noted related to this classification system?
Describe the two types of capital leases that exist from the lessor’s point of view.
Contrast the current operating and the all-inclusive concepts of income and identify
arguments used in supporting each.