Financial Reporting Standards quiz

The fundamental qualitative characteristic of faithful representation is contributed to by completeness, neutrality, and freedom from error.

The IASB is a standard setting body. The Securities and Exchange Commission (in the United States) and the Financial Conduct Authority (in the United Kingdom) are regulatory authorities .

The elements of financial statements related to the measure of performance are income and expenses .

Without the recognition of the standards by the regulatory authorities, such as the US SEC, private sector standard-setting bodies, such as the US Financial Accounting Standards Board, would have no authority.

(The requirement to prepare financial reports in accordance with specified accounting standards is the responsibility of standard-setting bodies) is incorrect . The requirement to prepare financial statements in accordance with specific accounting standards is the responsibility of regulatory authorities.

(Regulatory authorities are typically private sector, self-regulated organizations) is incorrect. Standard-setting bodies (not regulatory authorities) are typically private sector, self-regulated organizations .

New types of transactions may emerge that are not covered by existing accounting standards or regulations. Analysts should obtain information from a firm's management about the economic substance of such transactions to ensure that they serve a business purpose and have not been created primarily to manipulate the firm's financial statements .

In the IFRS framework, timeliness, comparability, verifiability, and understandability are characteristics that enhance the two fundamental qualitative characteristics, relevance and faithful representation. Information that is not timely will not be relevant or faithfully represent the activities of a firm over the reporting period.

IOSCO provides a forum for regulators from different jurisdictions to work together toward fair, efficient, and transparent markets, promoting cross-border cooperation and uniformity in securities regulation.

(enforcing financial reporting requirements for entities participating in capital markets) is incorrect. This is the role of regulatory authorities such as the Securities Exchange Commission. IOSCO is not a regulator and as such has no authority to regulate.

(promoting the use of International Financial Reporting Standards (IFRS) and the convergence of national accounting standards) is incorrect. This is the role of the IFRS Foundation .

The joint conceptual framework project aims to develop accounting standards based on principles in an attempt to achieve consistency in financial reporting approaches and judgments while trying to limit the range of acceptable answers.

(integrated with local legal and economic norms) is incorrect. The joint conceptual framework project reflects the widespread recognition that coordination among global standard-setting bodies is better suited to global capital markets than independent development of financial reporting standards within each country.

(comprehensive, complex rules designed to increase uniformity) is incorrect. This statement describes rules-based standards. The joint conceptual framework is designed to foster the development of principles-based standards.

Accuracy is not an enhancing qualitative characteristic. Faithful representation, not accuracy, is a fundamental qualitative characteristic .

The elements of financial statements related to the measurement of financial position are assets, liabilities, and equity.

International Accounting Standard (IAS) No 1 defines which financial statements are required and how they must be presented. The required financial statements are : 

Balance sheet.
Statement of comprehensive income.
Cash flow statement.
Statement of changes in equity.
Explanatory notes, including a summary of accounting policies.

Disclosures of material events that affect the company are required by the Securities and Exchange Commission (Form 8-K) for firms that are publicly traded in the United States.

Standard-setting bodies are professional organizations of accountants and auditors that establish financial reporting standards. Regulatory authorities are government agencies that have the legal authority to enforce compliance with financial reporting standards. Regulatory authorities, such as the Securities and Exchange Commission in the U.S. and the Financial Conduct Authority in the United Kingdom, are established by national governments. Most national authorities belong to the International Organization of Securities Commissions (IOSCO).

Standard setting bodies are private sector organizations that establish financial reporting standards. Enforcement is the responsibility of regulatory authorities .

A discussion of the impact would be the most meaningful, although (The standard will have no material impact) would also be useful.

The two underlying assumptions of financial statements according to the conceptual framework are accrual accounting and the going concern assumption. Historical cost is one of several measurement bases that may be used for financial reporting.

The four characteristics that enhance relevance and faithful representation are comparability, verifiability, timeliness, and understandability.

The two fundamental qualitative characteristics that make financial information useful are relevance and faithful representation.

Materiality relates to the level of detail of the information needed to achieve relevance.

Qualitative characteristics that accounting information must possess according to the IASB Conceptual Framework are relevance and faithful representation, which are enhanced by the characteristics of timeliness, verifiability, understandability, and comparability. While conservatism in accounting has traditionally been viewed as a desirable characteristic, it is not one of the qualitative characteristics specified in the IASB Conceptual Framework .

IFRS require reporting at least annually. The other two choices are requirements included in IAS No. 1

Balance sheet reporting elements (assets, liabilities, and owners’ equity) measure a company’s financial position. Income statement reporting elements (income, expenses) measure its financial performance .