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C. A coherent system of objectives and fundamentals that are expected to lead to consistent standards
D. A group of independent concepts on specific accounting issues, that are grouped together to provide a single
reference
B. To guide standard-setters to develop standards based on the same concepts and principles, rather than in a
piece-meal approach
3. 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'
4. 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
5. Which of the following appears to be most influential in developing the objectives of financial reporting and
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)
6. 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
7. 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
8. On what 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
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
9. 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 are not regarded as legitimate
users of financial reports according to the IASB Framework?
A. Users without some proficiency in financial accounting
10. 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
11. 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
12. Which characteristic of information, when omitted or mis-stated, could influence economic decisions taken
by users on the basis of financial statements?
A. Relevance
B. Reliability
C. Materiality
D. Comparability
C. It provides predictive value and feedback to confirm or correct earlier expectations
14. 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
15. Which of the following describes the accounting process?
A. Technical
B. Political
C. Procedural
D. Objective
16. Which of the following is not a characteristic of an asset, according to the IASB Framework?
A. 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
17. Which of the following is not a characteristic of a liability, according to the IASB Framework?
A. A future deposition or transfer of economic benefits to others
18. Which of the following will satisfy the definition of a constructive liability, as outlined in the IASB
Framework?
A. A decision by management to carry out maintenance over the next two years
C. A parent company's guarantee to meet the debts of a subsidiary entity if the subsidiary itself cannot pay them
19. 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
20. Which of the following is true in relation to expenses, according to the IASB Framework?
A. Expenses are restricted to transactions and events relating to 'ongoing major or central operations'
C. Expenses would not include losses that were not under the control of the entity, such as uninsured losses of
assets from flood
21. Which of the following measurement methods is not explicitly recognised in the IASB Framework,
although it is recognised in the FASB Framework?
A. Current market value
22. Which of the following is not a perceived advantage in developing a conceptual framework project?
A. Standard-setters will be less accountable for their decisions
B. Setting accounting standards will be more economical, despite resources needed to develop the Conceptual
Framework and standards
C. It will result in a reduced number of accounting standards where issues are covered by the Framework
D. It will provide a defence and enhance the legitimacy of the accounting profession
23. What does the political legitimacy argument, as outlined by Hines (1991), suggest?
A. The accounting profession consists of experts in technical knowledge of accounting, and therefore should be
given authority to regulate accounting
B. The accounting profession used the development of the conceptual framework as a strategy to promote their
self-regulation interests
C. The Conceptual Framework provides the authority to resolve technical issues with authority and legitimacy
D. As users are politically involved in developing the Conceptual Framework, the outcome has political
legitimacy
26. In Australia, according to SAC 2 'Objective of General-Purpose Financial Reporting', the primary user
groups(s) of general purpose financial reports are:
A. Resource providers
B. Recipients of goods and services
C. Parties performing a review or oversight function
D. All of the given options are correct
27. Which of the following statements is incorrect regarding the current work of IASB and FASB on the
Conceptual framework project?
A. IASB and FASB appear to maintain a restricted view of the users of general purpose financial reports, and
tend to disregard information rights or needs of users who do not have a direct financial interest in the
organisation
B. On the level of expertise expected of financial report readers, both parties accept that readers are expected to
have some proficiency in financial accounting
C. The conceptual framework project is a major undertaking for both Boards, and will take several years to
complete
D. Both Boards have agreed that the primary user group of general purpose financial reports is present and
potential equity investors
28. Over time, a number of objectives have been attributed to information provided within financial statements.
Which of the following is not an objective of financial statements?
A. To enable outsiders to assess the stewardship of management
B. To provide information to users that is useful for making and evaluating decisions about the allocation of
scarce resources
C. To enable reporting entities to demonstrate accountability between the entity and those parties to which the
entity is deemed to be accountable
D. To help managers to maximise their own wealth and the wealth of the organisation
Deegan_FAT3e_chapter_06 Key
C. A coherent system of objectives and fundamentals that are expected to lead to consistent standards
D. A group of independent concepts on specific accounting issues, that are grouped together to provide a single
reference
Deegan - Chapter 06 #1
difficulty: easy
B. To guide standard-setters to develop standards based on the same concepts and principles, rather than in a
piece-meal approach
Deegan - Chapter 06 #2
difficulty: easy
3. 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'
Deegan - Chapter 06 #3
difficulty: easy
4. 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
Deegan - Chapter 06 #4
difficulty: easy
5. Which of the following appears to be most influential in developing the objectives of financial reporting and
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)
Deegan - Chapter 06 #5
difficulty: medium
6. 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
Deegan - Chapter 06 #6
difficulty: medium
7. 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
Deegan - Chapter 06 #7
difficulty: easy
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
Deegan - Chapter 06 #8
difficulty: easy
9. 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 are not regarded as legitimate
users of financial reports according to the IASB Framework?
A. Users without some proficiency in financial accounting
Deegan - Chapter 06 #9
difficulty: easy
10. 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
11. 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
B. Reliability
C. Materiality
D. Comparability
C. It provides predictive value and feedback to confirm or correct earlier expectations
14. 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
B. Political
C. Procedural
D. Objective
16. Which of the following is not a characteristic of an asset, according to the IASB Framework?
A. 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
17. Which of the following is not a characteristic of a liability, according to the IASB Framework?
A. A future deposition or transfer of economic benefits to others
C. A parent company's guarantee to meet the debts of a subsidiary entity if the subsidiary itself cannot pay them
19. 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
20. Which of the following is true in relation to expenses, according to the IASB Framework?
A. Expenses are restricted to transactions and events relating to 'ongoing major or central operations'
C. Expenses would not include losses that were not under the control of the entity, such as uninsured losses of
assets from flood
22. Which of the following is not a perceived advantage in developing a conceptual framework project?
A. Standard-setters will be less accountable for their decisions
B. Setting accounting standards will be more economical, despite resources needed to develop the Conceptual
Framework and standards
C. It will result in a reduced number of accounting standards where issues are covered by the Framework
D. It will provide a defence and enhance the legitimacy of the accounting profession
23. What does the political legitimacy argument, as outlined by Hines (1991), suggest?
A. The accounting profession consists of experts in technical knowledge of accounting, and therefore should be
given authority to regulate accounting
B. The accounting profession used the development of the conceptual framework as a strategy to promote their
self-regulation interests
C. The Conceptual Framework provides the authority to resolve technical issues with authority and legitimacy
D. As users are politically involved in developing the Conceptual Framework, the outcome has political
legitimacy
Deegan - Chapter 06
difficulty: easy
Deegan - Chapter 06
difficulty: easy
26. In Australia, according to SAC 2 'Objective of General-Purpose Financial Reporting', the primary user
groups(s) of general purpose financial reports are:
A. Resource providers
B. Recipients of goods and services
C. Parties performing a review or oversight function
D. All of the given options are correct
Deegan - Chapter 06
difficulty: medium
27. Which of the following statements is incorrect regarding the current work of IASB and FASB on the
Conceptual framework project?
A. IASB and FASB appear to maintain a restricted view of the users of general purpose financial reports, and
tend to disregard information rights or needs of users who do not have a direct financial interest in the
organisation
B. On the level of expertise expected of financial report readers, both parties accept that readers are expected to
have some proficiency in financial accounting
C. The conceptual framework project is a major undertaking for both Boards, and will take several years to
complete
D. Both Boards have agreed that the primary user group of general purpose financial reports is present and
potential equity investors
Deegan - Chapter 06
difficulty: hard
28. Over time, a number of objectives have been attributed to information provided within financial statements.
Which of the following is not an objective of financial statements?
A. To enable outsiders to assess the stewardship of management
B. To provide information to users that is useful for making and evaluating decisions about the allocation of
scarce resources
C. To enable reporting entities to demonstrate accountability between the entity and those parties to which the
entity is deemed to be accountable
D. To help managers to maximise their own wealth and the wealth of the organisation
Deegan - Chapter 06
difficulty: medium
Deegan_FAT3e_chapter_06 Summary