Financial Reporting Standards quiz

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

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 .

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.

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

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

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

In the IASB conceptual framework, the two qualitative characteristics of financial statements are relevance and faithful representation. Timeliness is a characteristic that enhances relevance and faithful representation. Going concern is an underlying assumption of financial statements.

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 .

The Conceptual Framework identifies two important underlying assumptions of financial statements : accrual basis and going concern. Going concern is the assumption that the entity will continue to operate for the foreseeable future. Enterprises with the intent to liquidate or materially curtail operations would require different information for a fair presentation .

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 IASB is currently charged with developing International Financial Reporting Standards .

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

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 .

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.

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.

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

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 .

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 .

 The IASB Conceptual Framework states that the objective of financial reporting is to provide information about the firm to current and potential investors that is useful for making decisions about investing in or lending to the firm.

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