One consequence of the revenue-expense approach is to burden the balance sheet with
by-products of income measurement rules.
Assessment measures are concerned with particular attributes of objects and are always
direct measurements.
Accountability refers to the responsibility of management to report on achieving goals
for the effective and efficient utilization of enterprise resources.
Because of important national differences, a strong drive for harmonization of
accounting standards has not yet been possible.
SFAS No. 112 requires that postemployment costs be handled on an actuarial basis.
SFAC No. 5 appears to deny one of the main tenets of the efficient-markets hypothesis.
Timeliness is an enhancing qualitative characteristic of information about economic
phenomenon.
Because deductive research is grounded in real-world phenomena, it can realistically
focus on only a small part of the relevant environment.
The core of SFAS No. 106 is the need to predict future health care costs.
FASB lost a significant amount of independence from the SEC due to Sarbanes-Oxley’s
passage.
The Trueblood Study Group formed the FASB and called for significant changes in the
establishment of financial accounting standards.
With SFAS No. 95 defining funds as cash, the FASB has moved from a position of rigid
uniformity to a flexibility orientation.
An argument against lease capitalization was that the use of present value discounting
techniques introduced less reliable accounting numbers into the financial statements.
Congress empowered the Securities and Exchange Commission (SEC) to regulate
financial reporting in the 1930s.
Because accounting is not very much concerned with the human element, we can
expect it to be more precise in its measurement and predictions than are the natural
sciences.
Which of the following statements regarding behavioral research in accounting is not
true?
a. Much of this research uses laboratory subjects in carefully controlled experimental
situations.
b. This approach seeks to understand what accounting information is selected for use
and how it is processed.
c. This research has found that published financial statements are not often used for
managerial decision-making purposes.
d. The question of how representative student subjects are to the broad population is a
problem that pervades virtually all behavioral research that uses student subjects.
Under which of the following circumstances should finite uniformity be used?
a. If the event is a simple event
b. If the event is a complex event in which relevant circumstances cannot be measured
and implemented in a cost-effective manner
c. If the event is a complex event in which relevant circumstances can be measured and
implemented in a cost-effective manner
d. Both a and b
Which of the following statements is not true?
a. Inductive and deductive methods can be used together.
b. It is impossible to keep inductive research completely value-free.
c. Inductive approaches to accounting theory usually attempt to be descriptive.
d. Deductive research makes inferences about a population based on tests of data.
Which of the following are defined in the text as general approaches utilized in the
recognition and measurement of accounting events?
a. Concepts
b. Principles
c. Postulates
d. Axioms
The decision-usefulness approach is one of the classical approaches to accounting
theory mentioned in SATTA.
Which of the following is a true statement regarding a general price index?
a. Its computation does not require statistical sampling.
b. It is narrowly constructed to determine the changing level of prices in a particular
segment of the economy.
c. It is broadly constructed for ascertaining the change in prices for all goods and
services.
d. It cannot be used to compute price-level adjusted historical cost.
Which of the following methods starts with accrual income and adjusts it for the
noncash items it contains?
a. The indirect method
b. The direct method
c. Both a and b.
d. None of the above
Which of the following is not a true statement?
a. There is empirical evidence that future cash flows are better forecasted with accrual
data than with cash flow data.
b. Accrual accounting numbers incorporate the attribute that determines firm
valuation-net cash flow data.
c. Changes in reported accounting earnings affect firm valuation through changes in
stock prices.
d. The value to investors of the information in financial reporting lies in its role as an
historical record.
Harmonization of IASB and FASB standards is now being called:
a. Benchmarking
b. Conformity
c. Uniformity
d. Convergence
Which of the following statements applies to a voluntary termination?
a. The sponsor has a legal liability under ERISA for all accrued benefits.
b. The sponsor has a legal liability under ERISA for all vested benefits but not for
unvested benefits.
c. The sponsor has a legal liability under ERISA only for PBGC guaranteed benefits.
d. None of the above statements apply to a voluntary termination.
Which of the following methods of accounting for a business combination assumes that
the parent company purchases the subsidiary and must account for the acquisition as it
would for the acquisition of any asset.
a. Pooling of interests
b. The purchase method
c. The new entity approach
d. Proportionate consolidation
According to the text, “limited ability” in the Trueblood Committee Report’s second
financial statement objective may refer to:
a. Full disclosure.
b. Financial statements designed to meet the special needs of specific users.
c. Serving users with specific limitations.
d. Both a and b
Which one of the following statements is true regarding the decision-model approach to
research?
a. A premise underlying this research approach is that decision makers may need to be
taught how to use information they are unfamiliar with.
b. This approach has become more important with the rise of empirical research in
accounting.
c. Some advocates of newer approaches have declared that this approach is too
scientific.
d. The decision-model approach does not parallel those of standard-setters because
standard-setters must cope with the politics of the regulatory process.
Which of the following documents was the first to address the issue of user objectives
extensively?
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 groups is not listed in your text as being affected by accounting
regulation?
a. The FASB
b. Companies
c. Auditors
d. Free riders
Noncurrent liabilities are initially measured at:
a. Face value.
b. Present value based on current interest rates.
c. Present value plus stated interest.
d. Book value.
What is the going-concern postulate of ARS 1, and how has it been criticized?
What are the weaknesses of capital market research?
Explain how comprehensive allocation differs from partial allocation.
List and define the four standards for evaluating accounting that are at the heart of
ASOBAT.
Describe Ronen’s solution to the auditor behavior problem that involves the capture of
auditors by auditees.
How might the AICPA regain some of the power it has lost over the years? Are there
any disadvantages to these proposals?
Discuss the steps in the accounting standard-setting process and explain why it may not
be capable of dealing with the complex environment of the 2000s and beyond.
Describe how the definitions of assets and liabilities have evolved over the years.
Explain the concept of purchasing power gains and losses and how these gains and
losses arise.
Do the SFACs that constitute the conceptual framework establish generally accepted
accounting principles? What are the benefits and limitations of this approach?