Conceptual Framework and Accounting Standards

CONCEPTUAL FRAMEWORK AND ACCTG STANDARDS 1.2 1. Which of the following statements about the Norwalk Agreement is correct? a. The Norwalk Agreement requires all domestic companies in the U.S. to prepare financial statements in accordance with the IFRSs. b. The Norwalk Agreement is a short-term convergence between the FASB and the IASB which has long-time been abolished. c. The Norwalk Agreement is a convergence between the FASB and the IASB to make their existing financial reporting standards compatible and coordinate their future work programs to ensure that once achieved, compatibility is maintained. d. The Norwalk Agreement does not affect the financial reporting standards in the Philippines. 2. The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization’s operations is called a. financial accounting. b. tax accounting. c. managerial accounting. d. auditing. 3. The PFRSs consist of all of the following except a. PFRSs. b. PASs. c. Interpretations. d. Conceptual Framework. 4. It is the ofÏcial accounting standard setting body in the Philippines. It is composed of a chairperson and 14 members. a. Financial Reporting Standards Committee (FRSC) b. Financial Reporting Standards Council (FRSC) c. Accounting Standards Committee (ASC) d. Accounting Standards Council (ASC) 5. Financial reporting standards continuously change primarily in response to a. users’ needs. b. political influence. c. government regulations. d. changes in social environments. 6. Accounting is often called the "language of business" because a. it is easy to understand. b. it is fundamental to the communication of financial information. c. all business owners have a good understanding of accounting principles. d. accountants in many companies share financial information. 7. You are the accountant of ABC Co. During the period, your company purchased staplers worth ₱1,500. Although the staplers have an estimated useful life of 10 years, you have charged their cost as expense. Which of the following is most likely to be true? a. You are applying the concept of matching. b. You are applying the concepts of materiality and cost-benefit consideration. c. You are applying the concept of verifiability. d. You are just lazy to compute for the periodic depreciation.  8. All of the following statements incorrectly refer to the concepts in the Conceptual Framework except a. The Conceptual Framework is concerned with all-purpose financial statements. b. Financial statements are prepared and presented at least annually and are directed toward both the common and specific information needs of a wide range of users. c. The objective of general purpose financial statements is similar to the objective of general purpose financial reporting. d. The financial statements prepared by a reporting entity comprising a parent and its subsidiaries are referred to as ‘combined financial statements’. 9. What is the authoritative status of the Conceptual Framework? a. It has the highest level of authority. In case of a conflict between the Conceptual Framework and a Standard, the Conceptual Framework overrides that Standard. b. If there is a Standard that specifically applies to a transaction, that Standard overrides the Conceptual Framework. In the absence of such a Standard, the requirement of the Conceptual Framework should be followed. c. If there is a Standard that applies to a transaction, that Standard overrides the Conceptual Framework. In the absence of such a Standard, the entity’s management should consider the applicability of the Conceptual Framework in developing and applying an accounting policy that will result in useful information. d. The Conceptual Framework applies only to the IASB when developing or amending Standards. A reporting entity should never use the Conceptual Framework. 10. The foundation of the Conceptual Framework is formed from a. the qualitative characteristics that makes information useful to users. b. the objective of general purpose financial reporting. c. the concept of reporting entity. d. the principles and objectives of presentation and disclosure of financial information. 11. What is the objective of general purpose financial statements according to the Conceptual Framework? a. To provide information about the financial position, financial performance, and changes in financial position of an entity that is useful to primary users in making economic decisions. b. To prepare and present a balance sheet, an income statement, a cash flow statement, and a statement of changes in equity. c. To prepare and present comparable, relevant, reliable, and understandable information for investors and creditors. d. To prepare financial statements in accordance with all applicable Standards and Interpretations. 12. The primary users of financial statements under the Conceptual Framework include I. Existing and potential investors II. Employees III. Lenders and other creditors IV. Suppliers and other trade creditors V. VI. VII. VIII. a. b. c. d. Customers Governments and their agencies Public Professional accountants, including auditors I and III I, II, III, IV, V, VI, VII I, II, III, IV, V, VI all of these 13. The Conceptual Framework broadly classifies the qualitative characteristics into a. primary and secondary qualitative characteristics. b. major and minor qualitative characteristics. c. fundamental and enhancing qualitative characteristics. d. cold and hot qualitative characteristics. 14. Identify the fundamental qualitative Framework. I. Relevance II. Reliability III. Faithful representation IV. Comparability V. Verifiability VI. Timeliness VII. Understandability a. b. c. d. characteristics under the Conceptual I and II I and III I, II, III, IV, V and VI IV, V, VI and VII 15. Identify the qualitative characteristics that enhance the usefulness of financial information. I. Relevance II. Reliability III. Faithful representation IV. Comparability V. Verifiability VI. Timeliness VII. Understandability a. b. c. d. I and II I and III II, III, IV, V and VII IV, V, VI and VII 16. Which of the following are considered aspects of the qualitative characteristic of relevance under the Conceptual Framework? I. Predictive value II. Confirmatory value III. Timeliness IV. Materiality a. b. c. d. I and II I, II and III I, II and IV I, II, III and IV