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Standards (Web, Sch, CFA) Exam
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Which of the following statements about financial statements and reporting standards is least accurate? A) Financial statements could potentially take any form if reporting standards didn't exist. B) Reporting standards focus mostly on format and presentation and allow management wide latitude in assumptions. C) The objective of financial statements is to provide economic decision makers with useful information. - - - correct answer ✅B Given the variety and complexity of possible transactions, and the estimates and assumptions a firm must make when presenting its performance, financial statements could potentially take any form if reporting standards didn't exist. Reporting standards ensure that the information is "useful to a wide range of users," including security analysts, by making financial statements comparable to one another and narrowing the range within which management's estimates can be seen as reasonable. Reporting standards limit the range of assumptions management can make.
Standards (Web, Sch, CFA) Exam
Questions And Answers
Which description of the objective of financial statements is most accurate? The objective of financial statements is: A) to provide securities analysts with objective data about a firm's financial prospects. B) to provide economic decision makers with useful information about a firm's financial performance and changes in financial position. C) to provide a wide range of users with information about a firm's financial prospects. - - - correct answer ✅B The objective of financial statements is to provide economic decision makers with useful information about a firm's financial performance and changes in financial position. Assessing its prospects is the responsibility of analysts. Financial statements fall under the purview of the FASB in the US, not the IASB. The SEC does not set the objectives of financial statements, it is a regulatory authority.
Standards (Web, Sch, CFA) Exam
Questions And Answers
A) Develop global accounting standards requiring transparency, comparability, and high quality in financial statements. B) Account for the needs of emerging markets and small firms when implementing global accounting standards. C) Remain neutral in the debate on the use of global accounting standards to avoid appearance of a conflict of interest. - - - correct answer ✅C The IASB has four stated goals:
- Develop global accounting standards requiring transparency, comparability, and high quality in financial statements.
- Promote the use of global accounting standards.
- Account for the needs of emerging markets and small firms when implementing global accounting standards.
- Achieve convergence between various national accounting standards and global accounting standards.
Standards (Web, Sch, CFA) Exam
Questions And Answers
When a publicly traded U.S. company prepares a proxy statement for its shareholders prior to the annual meeting or other shareholder vote, it also files the statement with the SEC as Form: A) 8-K. B) DEF-14A. C) 144. - - - correct answer ✅B Form DEF-14A: When a company prepares a proxy statement for its shareholders prior to the annual meeting or other shareholder vote, it also files the statement with the SEC as Form DEF-14A. Form 8-K: Companies must file this form to disclose material events including significant asset acquisitions and disposals, changes in management or corporate governance, or matters related to its accountants, financial statements, or the markets on which its securities trade.
Standards (Web, Sch, CFA) Exam
Questions And Answers
national governments. Most national authorities belong to the International Organization of Securities Commissions (IOSCO). The process of developing one universally accepted set of accounting standards is best described as: A) unification. B) convergence. C) IASB. - - - correct answer ✅B Developing one universally accepted set of accounting standards is referred to as "convergence." The IASB is an accounting standard setting body involved in the process. Which of the following is most likely to be considered a barrier to developing one universally recognized set of reporting standards? A) Different standard-setting bodies of different countries disagree on the best treatment of a particular issue.
Standards (Web, Sch, CFA) Exam
Questions And Answers
B) Reluctance of firms to adhere to a single set of reporting standards. C) GATT already requires sufficient agreement. - - - correct answer ✅A A principal obstacle to agreement on a single set of reporting standards is that various standard-setting bodies and regulatory authorities disagree on what the standards should be. Firms generally support the idea because it would reduce the cost of reporting. GATT is the General Agreement on Tariffs and Trade and does not relate to financial reporting. The term "convergence" is most accurately used to describe: A) the reduction of the premium on a bond as it nears maturity. B) when expected return and required return are equal.
Standards (Web, Sch, CFA) Exam
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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. ? Income statement. ? Cash flow statement. ? Statement of changes in owners' equity. ? Explanatory notes, including a summary of accounting policies.
Standards (Web, Sch, CFA) Exam
Questions And Answers
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. 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. - - - correct answer ✅A Financial statements that are required by IAS No. 1 include a balance sheet, an income statement, 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.
Standards (Web, Sch, CFA) Exam
Questions And Answers
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. - - - correct answer ✅B 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. An analyst is least likely to use disclosures of accounting policies and estimates to evaluate:
Standards (Web, Sch, CFA) Exam
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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. - - - correct answer ✅A 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. Disclosures regarding accounting policies and estimates are found in: A) only the footnotes to the financial statements.
Standards (Web, Sch, CFA) Exam
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standards. Enforcement is the responsibility of regulatory authorities. Which of the following organizations is least likely involved with enforcing compliance with financial reporting standards? A. Financial Services Authority (FSA). B. Securities and Exchange Commission (SEC). C. International Accounting Standards Board (IASB). - - - correct answer ✅C The IASB is a standard-setting body. The SEC (in the United States) and the FSA (in the United Kingdom) are regulatory authorities. Dawn Czerniak is writing an article about international financial reporting standards. In her article she states, "Despite strong support from business groups for a universally accepted set of financial reporting standards, disagreements among the standard- setting bodies and regulatory authorities of various countries remain a barrier to developing one." Czerniak's statement is:
Standards (Web, Sch, CFA) Exam
Questions And Answers
A. correct. B. incorrect, because business groups have not supported a uniform set of financial reporting standards. C. incorrect, because disagreements among national standard- setting bodies and regulatory agencies have not been a barrier to developing a universal set of standards. - - - correct answer ✅B Political pressure from business groups and other interest groups who are affected by financial reporting standards has been a barrier to developing a universally accepted set of financial reporting standards. Disagreements among national standard-setting bodies and regulatory agencies have also been a barrier. According to the IASB Conceptual Framework, the fundamental qualitative characteristics that make financial statements useful are: A. verifiability and timeliness. B. relevance and faithful representation. C. understandability and relevance. - - - correct answer ✅B
Standards (Web, Sch, CFA) Exam
Questions And Answers
International Accounting Standard (IAS) No. 1 least likely requires which of the following? A. Neither assets and liabilities, nor income and expenses, may be offset unless required or permitted by a financial reporting standard. B. Audited financial statements and disclosures, along with updated information about the firm and its management, must be filed at least quarterly. C. Fair presentation of financial statements means faithfully representing the firm's events and transactions according to the financial reporting standards. - - - correct answer ✅B According to IAS No. 1, financial statements must be presented at least annually. Fair presentation is one of the IAS No. 1 principles for preparing financial statements. The ban against offsetting is one of the IAS No. 1 principles for presenting financial statements.
Standards (Web, Sch, CFA) Exam
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Which of the following statements about the FASB conceptual framework, as compared to the IASB conceptional framework, is most accurate? A. The FASB framework allows for upward revaluations of tangible, long-lived assets. B. The FASB framework and IASB framework are now fully converged. C. The FASB framework lists revenue, expenses, gains, losses, and comprehensive income related to financial performance. - - - correct answer ✅C The FASB framework lists revenues, expenses, gains, losses, and comprehensive income. The IASB framework only lists income and expenses. Which is least likely one of the conclusions about the impact of a change in financial reporting standards that might appear in management's discussion and analysis? A. Management has chosen not to implement the new standard.
