Financial Reporting Standards quiz

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 .

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 .

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.

Historical cost is the consideration paid to acquire an asset .

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

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

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 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.

 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.

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

 A core objective of IOSCO (International Organization of Securities Commissions) is to ensure that markets are fair, efficient, and transparent. The other core objectives are to reduce, not eliminate, systemic risk and to protect investors, not all users of financial statements.

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

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 .

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).

According to the Conceptual Framework for Financial Reporting, the objective of financial reporting is to provide information about the firm to current and potential investors and creditors that is useful for making their decisions about investing in or lending to the firm.

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 .

 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.