Question 1

What is the objective of financial reporting,as stated in the IASB Framework for the Preparation and Presentation of Financial Reports,and consistent with the Australian SAC 2: Objectives of Financial Reporting?
A) Stewardship
B) Accountability
C) Decision usefulness
D) All of the given options are correct.

Accepted Answer

The primary objective of financial reporting, according to the IASB Framework and consistent with Australian SAC 2, is to provide information that is useful for making economic decisions.

Question 2

Which of the following is not a characteristic of an asset,according to the IASB Conceptual Framework?
A) There is an expected future economic benefit.
B) The entity must have ownership over the resource giving rise to the future economic benefits.
C) The transaction or event giving rise to the ownership over future economic benefits must have occurred.
D) The reporting entity must have control over the resource to benefit from it, or to deny or regulate the access of others to the benefit.

Accepted Answer

Ownership is not a necessary characteristic of an asset according to the IASB Conceptual Framework. The Framework instead uses the term "control" to refer to the ability of an entity to benefit from or regulate access to a resource. The other three characteristics listed (expected future economic benefit, occurrence of a transaction or event, and control over the resource) are all included in the Framework's definition of an asset.

Question 3

Which of the following is true in relation to expenses,according to the IASB Conceptual Framework?
A) Expenses are restricted to transactions and events relating to 'ongoing major or central operations'.
B) There is no reference to matching of revenue and expenses in the Conceptual Framework.
C) Expenses would not include losses that were not under the control of the entity, such as uninsured losses of assets from flood.
D) None of the given options are correct.

Accepted Answer

The IASB Conceptual Framework does not explicitly refer to the matching of revenue and expenses, which is a traditional accounting concept where expenses are recognized in the period they help to generate revenues. The Framework focuses more on the recognition of expenses based on their nature and the period in which they are incurred, rather than strictly matching them with revenues.

Question 4

According to the IASB definition of 'income',which of the following is not included?
A) Non-reciprocal transfers such as grants, bequests or liabilities forgiven
B) Gains and losses from the sale of assets
C) Enhancement of assets
D) Dividends received

Accepted Answer

The answer of According to the IASB definition of 'income',which...

Question 5

Which of the following is not a characteristic of a liability,according to the IASB Conceptual Framework?
A) A future deposition or transfer of economic benefits to others will occur.
B) A past transaction or event is to have created the obligation.
C) There must be a legal obligation.
D) None of the given options are correct.

Accepted Answer

According to the IASB Conceptual Framework, a liability does not necessarily require a legal obligation; it can also arise from constructive or equitable obligations.

Question 6

Which of the following appears to be most influential in developing the objectives of financial reporting as well as a number of other concepts that have been used as a basis for most conceptual framework projects?
A) Accounting Principles Board (APB) Statement No 4 (1970)
B) The Trueblood Report (1973)
C) The Corporate Report (UK) (1976)
D) The Stamp Report (1980)

Accepted Answer

The Trueblood Report (1973) is considered to be most influential in developing the objectives of financial reporting as well as a number of other concepts that have been used as a basis for most conceptual framework projects. The report was commissioned by the American Institute of Certified Public Accountants and provided a comprehensive framework for financial reporting. The other options, APB Statement No 4 (1970), The Corporate Report (UK) (1976), and The Stamp Report (1980) are also important in the development of conceptual frameworks, but not as influential as the Trueblood Report.

Question 7

The objective of general purpose financial reporting is stated in most conceptual frameworks as providing decision-useful information to users of financial reports.Which of the following is not regarded as a legitimate user of financial reports according to the IASB Conceptual Framework?
A) Users without some proficiency in financial accounting
B) Recipients of goods and services
C) Special interest groups in the general public
D) All of the given options are correct.

Accepted Answer

The IASB Conceptual Framework assumes that users of financial reports have a reasonable knowledge of business and economic activities and accounting, and a willingness to study the information with reasonable diligence. Therefore, users without some proficiency in financial accounting are not regarded as the primary audience for financial reports according to the framework.

Question 8

Which of the following is a characteristic of reliability?
A) It influences economic decisions.
B) It represents faithfully what it purports to represent.
C) It provides predictive value and feedback to confirm or correct earlier expectations.
D) None of the given options are correct.

Accepted Answer

Reliability refers to the ability of a measurement to represent accurately and consistently what it intends to measure. Therefore, option B is the correct answer as it states that reliability represents faithfully what it purports to represent. Option A is incorrect as reliability doesn't necessarily influence economic decisions. Option C is partially correct as reliability provides feedback to confirm or correct earlier expectations, but predictive value is a characteristic of relevance, not reliability. Option D is incorrect as there is at least one correct option (B).

Question 9

On what criteria is a 'reporting entity',as defined in SAC 1,dependent?
A) Whether there are users that are dependent on the reports to make or evaluate resource decisions
B) Professional judgment providing some guidelines to help make a decision
C) Whether there are users that are dependent on the reports to make or evaluate resource decisions, and professional judgement provides some guidelines to help make a decision
D) The Corporations Law based on measures of gross revenue, dollar value of assets and the number of employees

Accepted Answer

According to SAC 1, a 'reporting entity' is dependent on whether there are users that are dependent on the reports to make or evaluate resource decisions, and professional judgement provides some guidelines to help make a decision. The Corporations Law may use measures of gross revenue, dollar value of assets and the number of employees as criteria, but SAC 1 is not solely dependent on these measures. Therefore, options A and D are incorrect. Option B mentions professional judgment, but does not include the crucial criterion of user dependence on the reports.

Question 10

Which of the following cannot be concluded from an overview of the history of the development of conceptual framework projects?
A) A number of countries have successfully completed conceptual framework projects.
B) Those responsible for them have either been reluctant to promote significant changes, or the changes suggested have not been accepted.
C) Conceptual framework projects have been reluctant to prescribe a particular valuation or measurement approach.
D) The conceptual framework is a continuous and evolving project.

Accepted Answer

While many countries have worked on conceptual framework projects, not all have successfully completed them, as the development of such frameworks is often complex and ongoing.

Question 11

What is the definition of a 'conceptual framework'?
A) A conceptual framework is a set of prescriptions of what accounting should be.
B) A conceptual framework is a structured positive theory of accounting.
C) A conceptual framework is a coherent system of objectives and fundamentals that are expected to lead to consistent standards.
D) A conceptual framework is a group of independent concepts on specific accounting issues, that are grouped together to provide a single reference.

Accepted Answer

A conceptual framework is a coherent system of objectives and fundamentals that are expected to lead to consistent standards. It provides a foundation for developing accounting standards and resolving accounting issues by providing a common set of concepts, definitions, and principles. It aims to enhance the usefulness and reliability of financial information by ensuring consistency in accounting practices. Option A is incorrect as a conceptual framework is a descriptive tool, not a prescriptive one. Option B is incorrect as it describes a positive theory, not a conceptual framework. Option D is incorrect as a conceptual framework is a holistic framework, not a group of independent concepts.

Question 12

The components,or building blocks,in the IASB Framework for the Preparation and Presentation of Financial Statements do not include:
A) The definition of 'financial reporting'
B) Definition of users and their needs
C) Underlying assumptions
D) Accounting standards

Accepted Answer

The IASB Framework for the Preparation and Presentation of Financial Statements provides the conceptual basis for financial reporting. The components of the framework include the objective and qualitative characteristics of financial information, definitions of the elements of financial statements, criteria for recognition and measurement, and underlying assumptions. However, accounting standards themselves are not considered a component of the framework. Rather, accounting standards are developed based on the conceptual framework to ensure that financial reporting is consistent and comparable across different entities. Therefore, option D (Accounting standards) is not a component of the IASB Framework.

Question 13

Since 1 January 2005,the Australian Accounting Standards Board's conceptual framework consists of:
A) The IASB's Framework for the Preparation and Presentation of Financial Statements
B) SAC 1: Definition of the Reporting Entity
C) SAC 2: Objectives of General Purpose Financial Reporting
D) All of the given options are correct.

Accepted Answer

Since 1 January 2005, the Australian Accounting Standards Board's conceptual framework has consisted of all the options given. The IASB's Framework for the Preparation and Presentation of Financial Statements provides the overarching framework, while SAC 1 provides guidance on identifying reporting entities and SAC 2 outlines the objectives of general purpose financial reporting. Therefore, all the given options are correct.

Question 14

Which of the following is a qualitative characteristic of financial information in general purpose financial reports,if they are to be useful?
A) Understandability
B) Comparability
C) Reliability
D) All of the given options are correct.

Accepted Answer

All three options (understandability, comparability, and reliability) are qualitative characteristics of financial information that should be present in general purpose financial reports. These characteristics help ensure that the information is useful for decision making by users of the financial statements.

Question 15

Which of the following represents a contradiction,rather than a trade-off that needs to be balanced?
A) Information may be reliable, but the time taken to ensure its reliability may result in it being potentially irrelevant.
B) Determining whether the benefits derived from information are greater than the costs to produce it.
C) The argument for neutrality and faithful representation; but standard-setters consider the economic consequences of standards.
D) Information may be relevant, but the data may be so unreliable that it could be potentially misleading.

Accepted Answer

Option C represents a contradiction because it highlights a fundamental conflict between the goal of achieving neutrality and faithful representation in financial reporting and the consideration of economic consequences by standard-setters, which can influence the neutrality of the standards.

Question 16

Which of the following describes the accounting process?
A) Technical
B) Political
C) Procedural
D) Objective

Accepted Answer

The answer of Which of the following describes the accounting...

Question 17

What is the purpose of developing a conceptual framework?
A) To provide a coherent structure to accounting practice which had developed in an ad hoc way.
B) To guide standard-setters to develop standards based on the same concepts and principles, rather than in a piecemeal approach.
C) To guide users where there is no accounting standard covering an issue.
D) All of the given options are correct.

Accepted Answer

A conceptual framework serves all of the purposes given in the options, including providing a coherent structure to accounting practice, guiding standard-setters in developing standards based on common concepts and principles, and guiding users where there is no accounting standard covering an issue.

Question 18

Which of the following will satisfy the definition of a 'constructive liability',as outlined in the IASB Conceptual Framework?
A) A decision by management to carry out maintenance over the next two years
B) A public offer to repair a defective good, even if it is out of warranty
C) A parent company's guarantee to meet the debts of a subsidiary entity if the subsidiary itself cannot pay them
D) All of the given options are correct.

Accepted Answer

A constructive liability arises when an entity has created a valid expectation in other parties that it will accept certain responsibilities, such as a public offer to repair defective goods.

Question 19

Which of the following was particularly concerned with addressing the rights of the community,in terms of access to financial information about entities?
A) Accounting Principles Board (APB) Statement No 4 (1970)
B) The Trueblood Report (1973)
C) The Corporate Report (UK) (1976)
D) The FASB Conceptual Framework Project

Accepted Answer

The Corporate Report (UK) (1976) was particularly concerned with addressing the rights of the community, including access to financial information about entities, emphasizing the importance of accountability and transparency to a wider group of stakeholders beyond just investors.

Question 20

Which characteristic of information,when omitted or misstated,could influence economic decisions taken by users on the basis of financial statements?
A) Relevance
B) Reliability
C) Materiality
D) Comparability

Accepted Answer

Materiality is the characteristic of information that determines whether it is important enough to influence the economic decisions of users. If material information is omitted or misstated in financial statements, users may make incorrect decisions based on incomplete or inaccurate information. Relevance, reliability, and comparability are also important characteristics of information, but they may not have as direct an impact on economic decisions as materiality.

Quiz 6: Normative Theories of Accounting: The Case of Conceptual Framework Projects

What is the objective of financial reporting,as stated in the IASB Framework for the Preparation and Presentation of Financial Reports,and consistent with the Australian SAC 2: Objectives of Financial Reporting?

Which of the following is not a characteristic of an asset,according to the IASB Conceptual Framework?

Which of the following is true in relation to expenses,according to the IASB Conceptual Framework?

According to the IASB definition of 'income',which of the following is not included?

Which of the following is not a characteristic of a liability,according to the IASB Conceptual Framework?

Which of the following appears to be most influential in developing the objectives of financial reporting as well as a number of other concepts that have been used as a basis for most conceptual framework projects?

The objective of general purpose financial reporting is stated in most conceptual frameworks as providing decision-useful information to users of financial reports.Which of the following is not regarded as a legitimate user of financial reports according to the IASB Conceptual Framework?

Which of the following is a characteristic of reliability?

On what criteria is a 'reporting entity',as defined in SAC 1,dependent?

Which of the following cannot be concluded from an overview of the history of the development of conceptual framework projects?

What is the definition of a 'conceptual framework'?

The components,or building blocks,in the IASB Framework for the Preparation and Presentation of Financial Statements do not include:

Since 1 January 2005,the Australian Accounting Standards Board's conceptual framework consists of:

Which of the following is a qualitative characteristic of financial information in general purpose financial reports,if they are to be useful?

Which of the following represents a contradiction,rather than a trade-off that needs to be balanced?

Which of the following describes the accounting process?

What is the purpose of developing a conceptual framework?

Which of the following will satisfy the definition of a 'constructive liability',as outlined in the IASB Conceptual Framework?

Which of the following was particularly concerned with addressing the rights of the community,in terms of access to financial information about entities?

Which characteristic of information,when omitted or misstated,could influence economic decisions taken by users on the basis of financial statements?