cityboy

9. Under International Financial Reporting Standards (IFRS) the preparation of a complete set of financial statements is best described as a(n):
A. objective of financial reporting.
B. general requirement for financial statements.
C. qualitative characteristic of the IFRS Framework.
               
Ans: B.
The preparation of a complete set of financial statements is a general requirement for financial statements.

A is incorrect. According to the IASB Conceptual Framework for Financial Reporting 2010 (the “Framework”), the objective of financial reporting is to provide information about the firm to current and potential investors and creditors that is useful for making their decisions about investing in or leading to the firm.

C is incorrect. The Framework outlines four qualitative characteristics of financial information: understandability, relevance, reliability and comparability.

cityboy

8. According to the International Financial Reporting Standards framework, which of the following qualities of financial information is least likely to improve its reliability?
A. Neutrality
B. Consistency
C. Substance over form
               
Ans: B.
The IFRS framework identifies five factors that contribute to reliability: faithful representation, substance over form, neutrality, prudence and completeness. Consistency is not one of them.

But any effective financial accounting framework, including IFRS and U.S.GAAP, should have the characteristics of transparency, comprehensiveness and consistency.

cityboy

7. Which of the following is a constraint as defined in the International Financial Reporting Standards (IFRS) Framework for the Preparation and Presentation of Financial Statements?
A. Neutrality
B. Timeliness
C. Going concern
               
Ans: B.
There are three primary financial reporting constraints: (1) trade offs desirable characteristics (e.g. timeliness and accuracy), (2) cost/benefit of providing the information, and (3) omission of nonquantifiable information.

A is incorrect. Neutrality is a factor that contributes to reliability. (The IFRS framework identifies five factors that contribute to reliability: faithful representation, substance over form, neutrality, prudence and completeness. Consistency is not one of them.)

C is incorrect. Going concern is an important underlying assumption of financial statements. (the other assumption is accrual accounting)

cityboy

6. According to the IFRS framework, which of the following is the least likely qualitative characteristic that makes financial information useful?
A. Materiality.
B. Comparability.
C. Understandability.
               
Ans: A.
The four principal qualitative characteristics that make financial information useful are understandability, relevance, reliability and comparability. Materiality relates to the level of detail of the information needed to achieve relevance – whether the omission or misstatement of the information would impact the decision maker's decision.

B is incorrect. Comparability is one of the qualitative characteristics.
Comparability – financial information should be consistent from period to period and should be comparable between companies.

C is incorrect. Understandability is one of the qualitative characteristics.
Understandability – financial statement should be understandable to users with basic business, accounting, and economic knowledge who are willing to study the information.

cityboy

5. To be recognized as a financial statement element under the IFRS Framework for the Preparation and Presentation of Financial Statements an element most appropriately needs to:
A. have a cost or value that can be measured with reliability.
B. normally be carried at historical cost, current cost or fair market value.
C. provide certainty that any future economic benefit associated with the item will flow to or from the enterprise.
               
Ans: A.
An item should be recognized in its financial statement element if a future economic benefit from the item (flowing to or from the firm) is probable and the item’s value or cost can be measured reliably.

B is incorrect. The amounts at which items are reported in its financial statement elements depend on their measurement base. Measurement bases include historical cost, amortized cost, current cost, realizable value, present value and fair value. But measurement base is not a requirement an item needs to satisfy to be reported on the financial statements.

C is incorrect. An item should be recognized in its financial statement element if a future economic benefit from the item (flowing to or from the firm) is probable. Certainty is not a requirement for economic benefits associated with an item to flow to or from the enterprise.

cityboy

4. Under IFRS, which of the following is most likely one of the fundamental principles underlying the preparation of financial statements?
A. Reliability.
B. Consistency.
C. Understandability.
               
Ans. B.
Based on International Accounting Standard (IAS) general requirements for financial statements, fundamental principles include fair presentation, going concern, accrual basis, consistency and materiality.

A is incorrect. Reliability is a qualitative characteristic of financial information under the IFRS Framework for the Preparation and Presentation of Financial Statement (the ‘Framework’). The Framework outlines four qualitative characteristics of financial information: Understandability, Relevance, Reliability and Comparability.

C is incorrect. Understandabilityis a qualitative characteristic of financial information under the IFRS Framework for the Preparation and Presentation of Financial Statement.

cityboy

3.Which of the following statements best describes the role of the International Organization of Securities Commissions (IOSCO)? The IOSCO:
A. is responsible for regulating financial markets of member nations.
B. is the oversight body to which the International Accounting Standards Board (IASB) reports.
C. assists in attaining the goal of cross-border cooperation in combating violations of securities laws.
               
Ans: C.
To ensure consistent application of international financial standards, it is important to have uniform regulation and enforcement across national boundaries. IOSCO assists in attaining this goal of uniform regulation as well as cross-border cooperation in combating violations of securities and derivatives laws.

C is incorrect.The IOSCO is not a regulator of financial markets.

B is incorrect doesn’t need to report to IOSCO.

cityboy

2. Under the IASB Conceptual Framework, one of the qualitative characteristics of useful financial information is that different knowledgeable users would agree that the information is a faithful representation of the economic events that it is intended to represent. This characteristic is best described as:
A. verifiability.
B. comparability.
C. understandability.                

Ans: A.
Under the International Accounting Standards Board’s Conceptual Framework, verifiability is the qualitative characteristic that means that different knowledgeable and independent users would agree that the information presented faithfully represents the economic events that it is intended to represent.

B is incorrect. Comparability: financial statement presentation should be consistent among firms and across time periods.

C is incorrect. Understandability: users with a basic knowledge of business and accounting and who make a reasonable effort to study the financial statements should be able to readily understand the information the statements present. Useful information should not be omitted just because it is complicated.