Financial Reporting Standards quiz

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

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.

Qualitative characteristics that accounting information must possess according to the IASBConceptual Framework are relevance and faithful representation, which are enhanced bythe characteristics of timeliness, verifiability, understandability, and comparability. Whileconservatism in accounting has traditionally been viewed as a desirable characteristic, it isnot one of the qualitative characteristics specified in the IASB Conceptual Framework .

The fundamental qualitative characteristics are relevance and faithful representation. Verifiability, timeliness, and understandability are enhancing qualitative characteristics .

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.

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

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.

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.

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.

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

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

The IASB is currently charged with developing International Financial Reporting Standards .

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

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.

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

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 .