1.

Financial statements are the principal means through which financial information is communicated to those outside an
enterprise. T
2. The major financial statements used under International Financial Reporting Standards (IFRS) include the statement of
changes in financial position and the statement of stockholders' equity. F
3. Users of the financial information provided by a company use that information to make capital allocation decisions. T
4. An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling
securities and obtaining and granting credit. T
5. One weakness of accrual accounting is that it does not provide a good indication of the enterprise's present and continuing
ability to generate favorable cash flows. F
6. The standard-setting structure used by the International Accounting Standards Board is very similar to that used by the
Financial Accounting Standards Board. T
7. The standards issued by various standard-setting organizations around the world include standards that are profit-oriented
and investor-focused. F
8. The International Accounting Standards Board (IASB) is a regulatory agency with enforcement powers for its International
Financial Reporting Standards (IFRS). F
9. International financial reporting interpretations (issued by the International Accounting Standards Board) are considered
authoritative and must be followed. T
10. Significant financial reporting issues facing global financial reporting and efficient capital allocation include how to provide
backward-looking information. F
11. Financial Accounting Concepts set forth fundamental objectives and concepts that are used in developing future standards of
financial accounting and reporting. T
12. The AICPA's Code of Professional Conduct requires that members prepare financial statements in accordance with generally
accepted accounting principles. T
13. A conceptual framework is a coherent system of interrelated objectives and fundamentals that can lead to consistent
standards. T
14. The International Accounting Standards Board (IASB) uses a conceptual framework based on individual concepts developed by
each member of the standard-setting body. F
15. The International Accounting Standards Board's (IASB's) Conceptual Framework includes the elements of financial statements.
T
16. One of the challenges in developing a common conceptual framework will be to agree on how the framework should be
organized since the FASB and IASB conceptual frameworks are organized in very different ways. F
17. Decision usefulness is the underlying theme of the conceptual framework. T
18. An implicit assumption of the International Accounting Standards Board's (IASB's) Conceptual Framework is that users need to
be experts in business and financial accounting matters to understand the information contained in financial statements. F
19. The idea of consistency does not mean that companies cannot switch from one accounting
method to another. T
20. In the International Accounting Standards Board's (IASB's) Conceptual Framework, an ingredient of a fundamental qualitative
characteristic is understandability.F
21. To be a faithful representation as described by the International Accounting Standards Board's (IASB's) Conceptual
Framework, information must be confirmatory.F
22. The International Accounting Standards Board's (IASB) definition of retained earnings is "the residual interest in the assets of
the entity after deducting all its liabilities." F
23. Materiality is one of the basic assumptions of accounting used by the International Accounting Standards Board (IASB).
F(Periodicity)
24. The IASB conceptual framework specifically identifies accrual basis accounting as one of its fundamental assumptions. T
25. One of two assumptions made by the IASB conceptual framework is that the reporting entity is a going concern. T
26. Under International Financial Reporting Standards (IFRS) product costs are charged off in the immediate period and period
costs may be carried into future periods. F
27. Under International Financial Reporting Standards (IFRS) supplementary information may be information that is high in
relevance but low in reliability. T
28. Under International Financial Reporting Standards (IFRS) companies need not report immaterial items within the body of the
financial statements, but must disclose them in the notes or supplementary information that accompany the financial
statements. F
29. Nominal (temporary) accounts are revenue, expense, and dividend accounts and are periodically closed. T
30. Under International Financial Reporting Standards (IFRS) the "book of original entry" is also known as the journal. T