karoliukas

Which of the following is least likely a qualitative characteristic accounting information must possess in order to provide useful information to an analyst, according to the IASB Conceptual Framework?

A) Faithful representation.

B) Relevance.

C) Conservatism.

---

Qualitative characteristics that accounting information must possess according to the IASB Conceptual Framework are relevance and faithful representation, which are enhanced by the characteristics of timeliness, verifiability, understandability, and comparability. Conservatism may be a desirable characteristic, but is not one of the qualitative characteristics specified in the IASB Conceptual Framework.

karoliukas

According to the IFRS framework, timeliness is a characteristic that enhances:

A) both relevance and faithful representation.

B) faithful representation.

C) relevance.

---

In the IFRS framework, timeliness, comparability, verifiability, and understandability are characteristics that enhance the two fundamental qualitative characteristics, relevance and faithful representation.

karoliukas

Which of the following is a company least likely required to present according to International Accounting Standard (IAS) No. 1?

A) A summary of accounting policies.

B) Disclosures of material events.

C) Statement of changes in owners’ equity.

---

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.

karoliukas

Required financial statements, according to International Accounting Standard (IAS) No. 1, include a(n):

A) balance sheet and explanatory notes.

B) income statement and working capital summary.

C) cash flow statement and auditor’s report.

---

Financial statements that are required by IAS No. 1 include a balance sheet, a statement of comprehensive 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. IAS No. 1 does not require an auditor’s report or a working capital summary.

karoliukas

Which of the following statements about the elements of financial statements under the FASB and IASB frameworks is least accurate?

A) The word “probable” is used by the FASB to define assets and liabilities.

B) The IASB framework lists income and expenses as the elements related to performance.

C) The IASB framework does not allow the values of assets to be adjusted upward.

---

Differences in financial statement elements include: (1) The IASB framework lists income and expenses as the elements related to performance, while the FASB framework uses revenues, expenses, gains, losses, and comprehensive income. (2) FASB defines an asset as a future economic benefit, where IASB defines it as a resource from which a future economic benefit is expected. (3) The word “probable” is used by the FASB to define assets and liabilities. (4) The FASB framework does not allow the values of most assets to be adjusted upward.

karoliukas

Disagreements that inhibit development of a coherent financial reporting framework are least likely to involve which of the following?

A) Transparency.

B) Valuation.

C) Standard setting.

---

There is widespread agreement that transparency is desirable in financial reporting. Disagreements that inhibit development of a single framework often arise around issues of measurement, valuation, and standard setting.

karoliukas

Which of the following is least likely to be considered a characteristic of a coherent financial reporting framework?

A) Transparency.

B) Stability.

C) Comprehensiveness.

---

Financial reporting should be transparent and comprehensive. Stability of accounting information is not a characteristic of a coherent reporting framework.

karoliukas

Management disclosure of the likely impact of implementing recently issued accounting standards is least likely to:

A) conclude that the standard does not apply.

B) state that the impact of the standard is impossible to determine.

C) conclude that the standard will not affect the financial statements materially.

---

A disclosure that is required for public companies is the likely impact of implementing recently issued accounting standards. Management can discuss the impact of adopting the standard, conclude that the standard does not apply or will not affect the financial statements materially, or state that they are still evaluating the effects of the new standards. Analysts should be aware of the uncertainty that this last statement implies.

karoliukas

An analyst can find a company’s significant accounting methods and estimates in:

A) both the footnotes to the financial statements and Management’s Discussion and Analysis.

B) only the footnotes.

C) both the footnotes and in the auditor’s opinion.

---

Companies that prepare financial statements under IFRS or U.S. GAAP must disclose their accounting policies and estimates in the footnotes and address those policies and estimates where significant judgment was required in Management’s Discussion and Analysis. The auditor’s opinion discusses whether policies have been applied appropriately, but does not include the estimates and policies themselves.

karoliukas

An analyst is least likely to use disclosures of accounting policies and estimates to evaluate:

A) what policies are likely to be modified in future periods.

B) whether the disclosures have changed since the prior period.

C) what policies are discussed.

---

Companies that prepare financial statements under IFRS or U.S. GAAP must disclose their accounting policies and estimates in the footnotes and Management’s Discussion and Analysis. An analyst should use these disclosures to evaluate what policies are discussed, whether they cover all the relevant data in the financial statements, which policies required management to make estimates, and whether the disclosures have changed since the prior period.