The essence of SFAS No. 142 is that goodwill must now be amortized over 40 years.
The stock market shows that people are willing to contract privately for information
about a firm.
The assumption of the capital asset pricing model is that individual securities are priced
solely on unsystematic risk.
Leases have been the subject of more accounting standards than any other single topic.
Previous accounting standards have used a revenue-expense approach to pension
accounting, which emphasizes the recognition and measurement of annual pension cost.
The American Accounting Association was originally called the American Society of
Certified Public Accountants.
All of the tests or conditions identified in SFAS No. 13 must be met before a lease can
be capitalized.
A problem brought up by SATTA is the diversity of users in terms of their decisions and
their possible different information needs.
Indirect measures are usually preferable to direct measures because they are less costly
to obtain.
Timing differences are now referred to as temporary differences.
The assumption that OPEBs are part of the total compensation package for covered
employees clearly stamps them as being attributable to past transactions or events.
The study by Lev that examined earnings numbers and stock returns found a high
explanatory relationship between earnings and stock returns.
With regard to users, SFAC No. 1 established that financial statements should be aimed
at a common core of similar information users.
Application of the purchase method may be complicated by part of the purchase price
being of a noncash nature.
Respond to the following:
Which of the following is a true statement regarding SFAS No. 95?
a. It requires all noncash investing and financing transactions be reported in the body of
the cash flow statement.
b. It requires all noncash investing and financing transactions be reported as a
supplement to the cash flow statement, either in a schedule or in a narrative format.
c. Only cash transactions are reported on the cash flow statement.
d. Only operating transactions are reported on the cash flow statement.
Which of the following applies to the clean surplus theory?
a. It is a theory that is applied to security valuation, but is not very attuned to
accounting concepts and numbers.
b. The theory values a firm’s equity based on the beginning of the period book value
plus the present value of expected future abnormal earnings.
c. The theory considers a firm’s abnormal earnings amount to be equal to its beginning
of the period book value multiplied by the cost of equity capital.
d. This theory does not tie in well with the FASB’s concept of comprehensive income.
Which of the following is not a function of financial statements as stated in the text?
a. Assessing managerial performance
b. Valuing the company
c. Providing accurate information to taxing agencies
d. Making credit decisions
Which of the following terms represents the two general types of relevant
circumstances?
a. Present circumstances and future contingencies
b. Present conditions and future contingencies
c. Present magnitudes and future conditions
d. Present magnitudes and future contingencies
The qualitative characteristics of accounting on which the conceptual framework is
centered come under the general heading of:
a. Relevance.
b. Materiality.
c. Representational faithfulness.
d. Decision usefulness.
Which of the following theories assumes that the firm and its owners are separate
beings?
a. Residual equity theory
b. Proprietary theory
c. Entity theory
d. Commander theory
APB Opinion No. 19 permitted fund balance accounts in the statement of changes in
financial position to include which of the following?
a. Quick assets only
b. Cash and near cash only
c. Working capital only
d. Cash, cash and near cash, quick assets, or working capital
Which of the following terms is used to refer to the harmonization present among the
accounting rules of different countries?
a. Formal harmonization
b. De jure harmonization
c. Convergence
d. All of the above
Which of the following would be considered a political factor relative to the financial
accounting policy function?
a. Auditors
b. Inflation
c. Taxes
d. Price changes
Critical accounting:
a. Developed from two other areas of accounting, behavioral accounting and agency
theory.
b. Is concerned with the economic rather than social role of accountants.
c. Presumes a sharp separation between the researcher and his or her field of
investigation.
d. Views accounting as having a pivotal role in adjudicating conflicts between the
corporation and constituencies such as labor, consumers, and the general public.
The degree of consensus among measurers is referred to in the conceptual framework
as:
a. Reliability.
b. Relevance.
c. Representational faithfulness.
d. Understandability.
Which of the following statements are not required under Germany’s accounting
standards?
a. The Balance Sheet
b. The Income Statement
c. The Cash Flow Statement
d. All of the above are required
Which of the following applies to leveraged leases?
a. Leveraged leases are a special type of operating lease involving three parties.
b. The lessor acquires an asset to be leased by borrowing money from a third party.
c. From a lessor’s viewpoint, this type of lease is not any different from other leases.
d. The FASB concluded in SFAS No. 13 that the financing-type lease plus debt
transaction analogy was adequate to report leveraged leases.
SFAC No. 8 replaces
a. SFAC No. 1
b. SFAC No. 2
c. SFAC No. 3
d. SFAC No. 1 and 2.
Which of the following is an accurate overall label for the terms postulates and
principles?
a. Constraints
b. Concepts
c. Axioms
d. Conventions
How and why did the AICPA’s role change under Sarbanes-Oxley?
What is meant by “the paradox of regulation”?
How and why were SPEs changed by FASB Interpretation No. 46 and Interpretation
46R?
List the four types of measurement scales in order of measurement rigor. Describe and
give examples of each type of scale.
How does the concept of uniformity relate to comparability in the accounting literature?
Explain the main key points regarding asset and liability measurement made in SFAC
No.