Financial Reporting Standards quiz

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

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 .

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

 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.

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).

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 .

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

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.

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

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 .

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

 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.

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

Financial statements that are required by IAS No. 1 include a balance sheet, a statement ofcomprehensive income, a cash flow statement, a statement of changes in owners' equity,and explanatory notes that include a summary of the company's accounting policies. IASNo. 1 does not require an auditor's report or a working capital summary.

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.