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Measurements based on the accountability objective would include earnings per share
but not return on investment.
SFAS No. 35 is considered a landmark standard because it set accounting and reporting
standards for a new entity, the pension plan, as separate and distinct from the
sponsoring company.
Arguments supporting unregulated markets are largely inductive in nature.
Accounting concepts have largely evolved from practical operating necessities,
including income tax laws.
SFAS No. 89 continued the requirement that current cost income measurement,
purchasing power gain or loss and holding gain information be disclosed.
Capital market research has shown that investors do not appear to adjust accounting
income to compensate for artificial bookkeeping differences.
On the statement of cash flows, the direct method reports literal cash flows related to
income statement classifications.
In accounting, we presume that if rigid uniformity can be attained, it is superior to finite
uniformity.
The conceptual framework maintains that accounting reports should become the only
relevant source of information about enterprises.
All intangible assets are initially recorded at the sacrifice incurred to acquire the assets.
The SEC was created by Congress to replace the AICPA's standard-setting group.
The APB was the first to successfully derive an underlying framework of postulates and
principles.
The scientific method refers to the formal procedures used to derive the laws and
principles that govern scientific disciplines, such as physics and chemistry, and is
therefore not used in the published research on accounting.
SFAS No. 33 specified which of the following as the basis of primary financial
statements?
a. Replacement cost
b. Nominal historical cost
c. Current value
d. Constant dollar
Which of the following is a true statement?
a. Research is supportive of the contention that cash and funds flow data are
informative above and beyond accrual data.
b. Use of the direct method in the cash flow statement frequently results in
nonarticulation.
c. Interest expense and long-term notes payable both appear in the financing section of
the cash flow statement.
d. With SFAS No. 95, the FASB chose to follow the entity model rather than the
traditional income statement (proprietary) approach.
The idea that a measurement should correspond with the phenomenon it is attempting to
measure is referred to in the conceptual framework as:
a. Reliability.
b. Relevance.
c. Faithful representation.
d. Understandability.
Which of the following statements applies to APB Opinion No. 31?
a. It was criticized on the grounds that it resulted in inconsistent capitalization of
financing-type leases.
b. It required disclosures adequate to permit users to informally capitalize
noncapitalized lease obligations if they so desired.
c. It was an omnibus opinion.
d. It was concerned with lease contracts between related parties.
Which of the following is a true statement regarding Moonitz's approach to ARS 1?
a. He initially rejected an inductive type of approach.
b. He used symbolic terminology and formal methods.
c. He rejected a deductive approach rooted in reasoning alone.
d. He was unconcerned about the experiential and empirical aspects of accounting.
Which of the following factors led to significant changes in accounting practices?
a. The Great Depression of 1929
b. The election of Franklin D. Roosevelt to the presidency in 1932
c. The enactment of the New Deal legislation
d. All of the above
Which of the following statements is true regarding ARS 3?
a. One of its principles states that revenue is earned by the entire process of operations
of the firm rather than at the point of sale.
b. All of its principles were derived from the postulates of ARS 1.
c. The asset valuation measures prescribed are additive.
d. One of the main criticisms aimed at ARS 3 relates to its advocating the exit-value
approach to asset valuation.
The G4+1 report on leases would:
a. Make all leases operating leases.
b. Cause the lessee to show operating leases as assets.
c. Move leases from the area of rigid uniformity to finite uniformity.
d. Enhance the distinction between operating and financing leases.
Most firms elected to define funds in the statement of changes in financial position as:
a. Cash.
b. Working capital.
c. Current assets.
d. Owners' equity.
Which of the following represents the "transfer of the benefits and risks of ownership"
approach to capital leases?
a. Limit capital leases to leases that are virtually conditional sales agreements with
installment payments.
b. Capitalize leases where a purchase equivalent has occurred.
c. The lease treatment is the same for lessor and lessee.
d. Capitalize leases that are not true leases.
Where rigid uniformity is in effect, the underlying reasons may be attributable to all but
which one of the following factors?
a. A desire for conservatism
b. An inability of the standard-setting organization to determine meaningful relevant
circumstances
c. An attempt to increase representational faithfulness of the measurement
d. Recognition of the fact that an allocation is involved
Benefit improvements give rise to:
a. Prior service costs.
b. Past service costs.
c. Actuarial service costs.
d. Benefit improvement costs.
Which of the following is true?
a. Convergence of IASB and FASB standards will be a major step towards international
harmonization.
b. The IASB has reduced disclosure requirements.
c. The IASB has increased the allowed number of treatment in particular event areas.
d. FASB and the IASB have not yet committed to convergence of IFRS and U.S.
GAAP.
Which of the following is not a true statement?
a. Prior to SFAS 33, the majority of accounting literature on the subject of changing
prices dealt with the possibility of restating historical cost financial statements for
changes in general price levels.
b. Prior to SFAS 33, the majority of accounting literature on the subject of changing
prices dealt with the possibility of adopting current cost as a new measurement system.
c. The need to consider the effects of changing prices in financial reports has followed a
rather evolutionary development.
d. Measuring current costs is easier than restating historical cost for changes in units of
currency.
Which of the following is not true about the FASB?
a. It considers the economic consequences of proposed accounting policies.
b. It has seriously considered the question of the desirability of corporate social
responsibility accounting.
c. It is sensitive to whether there are sufficient benefits to external users to warrant the
imposition of new accounting standards.
d. The FASB has commissioned studies to aid in assessing the effects of proposed
standards on firms.
Vesting refers to:
a. A qualifying period of pension plan membership that must be met before
contributions are made by the employer.
b. A qualifying period of pension plan membership that must be met before pension
benefits legally exist.
c. A qualifying period of pension plan membership after which benefits are received.
d. A qualifying period of pension plan membership after which contributions may
cease.
The term International Financial Reporting Standard (IFRS) refers to:
a. The new numbered series of pronouncements that the IASB is issuing.
b. The entire body of IASB pronouncements, including International Accounting
Standards issued between 1973 -2001.
c. Both a and b
d. None of the above
Which of the following is not a supplemental disclosure by the lessee required by SFAS
No. 13 for noncancellable operating leases in excess of one year?
a. Future minimum rental payments in aggregate and for each of the succeeding five
periods
b. The present value of minimum lease payments
c. Total minimum rentals to be received under noncancellable subleases
d. Rental expenses with separate totals for minimum rentals, contingent rentals, and
sublease rentals
Which of the following is not true regarding the time period postulate?
a. It results in an artificial segmentation of a continuing process.
b. It has led to accrual accounting.
c. It allows different accounting methods to be followed in interim periods.
d. It allows interim reports to include estimates of annual amounts.
How many of the four capitalization tests of SFAS No. 13 must be met for a lease to be
capitalized?
a. One
b. Two
c. Three
d. Four
For which measurement scale must the change in the attribute measured among
assigned numbers be equal?
a. Interval scale
b. Ratio scale
c. Ordinal scale
d. Both a and b
