Financial Reporting Standards quiz

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.

The SEC is responsible for overseeing the PCAOB under the Sarbanes–Oxley Act of 2002 .

(Prosecuting analysts who disseminate conclusions based on non-material non-public information ) is incorrect. Under mosaic theory, it is not a violation of CFA Institute standards or securities laws to disseminate conclusions based on non-material non-public information in combination with an analysis of public information.

(Promoting the adoption of global financial reporting standards) is incorrect. This is one of the principle objectives of the IFRS Foundation .

Understandability is an enhancing qualitative characteristic of financial information - not a constraint .

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

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 .

Under the IASB’s Conceptual Framework, verifiability means that different knowledgeable and independent users would agree that the information presented faithfully represents the economic events that it is intended to represent.

(Understandability)  is incorrect. is the clear and concise presentation of information.

(Comparability ) is incorrect. Comparability allows users to identify and understand similarities and differences of items.

Relevance and faithful representation are the two fundamental qualitative characteristics that make financial information useful, according to the IASB Conceptual Framework.

(understandability and verifiability) is incorrect. understandability and verifiability are two characteristics that enhance the usefulness of relevant and faithfully represented financial information.

(timeliness and accrual accounting) is incorrect. Timeliness enhances the usefulness of relevant and faithfully represented financial information. Accrual accounting is an underlying assumption.

Financial statements provide information, including information about the entity’s financial position, performance, and changes in financial position, to users. They do not typically provide information about users .

There is no statement of changes in income. Under IAS No. 1 , a complete set of financial statements includes a statement of financial position, a statement of comprehensive income, a statement of changes in equity, a statement of cash flows, and notes comprising a summary of significant accounting policies and other explanatory information.

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

 Accrual basis reflects the effects of transactions and other events being recognized when they occur, not when the cash flows. These effects are recorded and reported in the financial statements of the periods to which they relate.

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

The IASB Conceptual Framework names relevance and faithful representation as the two fundamental characteristics that make financial information useful.

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

The FASB is responsible for the Accounting Standards Codification , the single source of nongovernmental authoritative US generally accepted accounting principles.

 According to the conceptual frameworks adopted under both International Financial Reporting Standards and US GAAP, faithful representation and relevance are the two fundamental qualitative characteristics that make financial information useful.

(comparability) is incorrect. Comparability is an enhancing qualitative characteristic.

(Understandability) is incorrect. Understandability is an enhancing qualitative characteristic.

The annual report is not a requirement of the SEC.

Form The 10-K is incorrect . The 10-K is required by the SEC

proxy statement is incorrect . A proxy statement is required by the SEC

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

The amount that would be received in an orderly disposal is realizable value .

Historical cost is the consideration paid to acquire an asset .