Question 1

Match the assumption/principle in column 1 with the best illustration of an implication in column 2.

Accepted Answer

Going concern - C
Accrual basis - A
Period reporting - B

Question 2

In a company that you work for,a building which cost $150,000 ten years ago now has a market value of $400,000.For financial statement purposes,what arguments would you put forward to convince your Chief Executive Officer that this building should be shown in the financial reports at its current market value?

Accepted Answer

The historical cost of $150,000 was a fair value of the building 10 years ago.This value does not recognise the current value of the building,which is $400,000.The adoption of the current market value (which must be certified by qualified valuers)ensures that assets in the Balance Sheet are not underestimated and therefore reflects the fair values for those assets.

Question 3

Distinguish between 'general purpose' and 'special purpose' financial statements and outline the significance of this distinction.

Accepted Answer

General purpose financial statements are those specified in the NZ Framework.They are termed 'general' because they are prepared to meet the information needs of a wide range of users.Special purpose financial statements are external financial statements intended for specific users who are able to determine the information to be reported to them.Examples include the IRD for tax purposes,and lenders such as banks or other financial institutions.
The significance of the distinction is that accounting standards are compulsory only in respect of general purpose financial statements.Essentially,accounting standards provide a safeguard for the information needs of users who,in their own right,are unable to obtain the necessary information.

Question 4

Explain the term 'period reporting'.Why is this concept important?

Accepted Answer

The answer of Explain the term 'period reporting'.Why is this...

Question 5

Briefly explain the purpose and function of Accounting Standards,distinguishing between an IFRS and an NZ IFRS.

Accepted Answer

The answer of Briefly explain the purpose and function of...

Question 6

It is vital that financial statements can be relied on.What steps would you recommend an organisation takes to ensure that the information in its financial statements achieves this?

Accepted Answer

The answer of It is vital that financial statements can...

Question 7

How does the Statement of Accounting Policies and its required content fulfil the 'concept of comparability'?

Accepted Answer

The answer of How does the Statement of Accounting Policies...

Question 8

Match the assumption/principle in column 1 with the best illustration of an implication in column 2.

Accepted Answer

The answer of Match the assumption/principle in column 1 with...

Question 9

There are 3 main points to the NZ Framework definitions of an asset.Apply those 3 main points to each of the following scenarios,and determine whether an asset should be recognised and recorded in the Balance Sheet.
a A firm is involved in a court case in which it is suing a competitor for $100,000 for copying its product and trademark.The court case has not yet been decided.
b A firm has signed a contract of purchase for 2 tonnes of bananas in Ecuador,and also has an insurance contract for loss of sales and profits if the bananas are damaged,lost or held back in any way from the voyage to New Zealand.
c A firm has just signed a world-famous New Zealand netballer to work for them in a marketing position.The netballer's international contacts and high profile are expected to win the firm several lucrative contracts.The contract of employment may be terminated by either party,provided written notice is given 2 weeks in advance of the termination date.

Accepted Answer

The answer of There are 3 main points to the...

Question 10

Explain the 'monetary assumption',the 'going concern assumption' and the 'accounting period assumption',giving an example for each assumption in the financial statements.

Accepted Answer

The answer of Explain the 'monetary assumption',the 'going concern assumption'...

Question 11

According to the NZ Framework,it is appropriate to use multiple measurement bases.What does this mean,and what disclosure must be made?

Accepted Answer

The answer of According to the NZ Framework,it is appropriate...

Question 12

The NZ Framework serves four main functions in supporting the presentation of a true and fair view in financial reporting - interpretation,benchmarking,audit and philosophical.Discuss how the NZ Framework works in each of these functions.

Accepted Answer

The answer of The NZ Framework serves four main functions...

Question 13

Briefly contrast cash accounting with accrual accounting,in terms of the types of transactions that are recorded under each system.Which is the most objective system?

Accepted Answer

The answer of Briefly contrast cash accounting with accrual accounting,in...

Question 14

Match the assumption/principle in column 1 with the best explanation or illustration in column 2.

Accepted Answer

The answer of Match the assumption/principle in column 1 with...

Quiz 3: The New Zealand Framework

Match the assumption/principle in column 1 with the best illustration of an implication in column 2.

Distinguish between 'general purpose' and 'special purpose' financial statements and outline the significance of this distinction.

Explain the term 'period reporting'.Why is this concept important?

Briefly explain the purpose and function of Accounting Standards,distinguishing between an IFRS and an NZ IFRS.

It is vital that financial statements can be relied on.What steps would you recommend an organisation takes to ensure that the information in its financial statements achieves this?

How does the Statement of Accounting Policies and its required content fulfil the 'concept of comparability'?

Match the assumption/principle in column 1 with the best illustration of an implication in column 2.

Explain the 'monetary assumption',the 'going concern assumption' and the 'accounting period assumption',giving an example for each assumption in the financial statements.

According to the NZ Framework,it is appropriate to use multiple measurement bases.What does this mean,and what disclosure must be made?

The NZ Framework serves four main functions in supporting the presentation of a true and fair view in financial reporting - interpretation,benchmarking,audit and philosophical.Discuss how the NZ Framework works in each of these functions.

Briefly contrast cash accounting with accrual accounting,in terms of the types of transactions that are recorded under each system.Which is the most objective system?

Match the assumption/principle in column 1 with the best explanation or illustration in column 2.