1CA1-1 (FASB and Standard-Setting) Presented below are four statements which you are to identify astrue or false. If false, explain why the statement is false. 1. GAAP is the term used to indicate the whole body of FASB authoritative literature. 2. Any company claiming compliance with GAAP must comply with most standards and interpretations but does not have to follow the disclosure requirements. 3. The primary governmental body that has influence over the FASB is the SEC. 4. The FASB has a government mandate and therefore does not have to follow due process in issuing a standard.Solution: 1- True 2- False 3- True 4- False
CA1-3 (Financial Reporting and Accounting Standards) Answer the following multiple-choicequestions. 1. GAAP stands for: o (a) governmental auditing and accounting practices. o (b) generally accepted attest principles. o (c) government audit and attest policies. o (d) generally accepted accounting principles. 2. Accounting standard-setters use the following process in establishing accounting standards: o (a) Research, exposure draft, discussion paper, standard. o (b) Discussion paper, research, exposure draft, standard. o (c) Research, preliminary views, discussion paper, standard. o (d) Research, discussion paper, exposure draft, standard. 3. GAAP is comprised of: o (a) FASB standards, interpretations, and concepts statements. o (b) FASB financial standards. o (c) FASB standards, interpretations, EITF consensuses, and accounting rules issued by FASB predecessor organizations. o (d) any accounting guidance included in the FASB Codification 4. The authoritative status of the conceptual framework is as follows. o (a) It is used when there is no standard or interpretation related to the reporting issues under consideration. o (b) It is not as authoritative as a standard but takes precedence over any interpretation related to the reporting issue. o (c) It takes precedence over all other authoritative literature. o (d) It has no authoritative status. 5. The objective of financial reporting places most emphasis on: o (a) reporting to capital providers. o (b) reporting on stewardship. o (c) providing specific guidance related to specific needs. o (d) providing information to individuals who are experts in the field. 6. General-purpose financial statements are prepared primarily for: 2 • 3. o (a) internal users. o (b) external users. o (c) auditors. o (d) government regulators. 7. Economic consequences of accounting standard-setting means: o (a) standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard. o (b) standard-setters must ensure that no new costs are incurred when a new standard is issued. o (c) the objective of financial reporting should be politically motivated to ensure acceptance by the general public. o (d) accounting standards can have detrimental impacts on the wealth levels of the providers of financial information. 8. The expectations gap is: o (a) what financial information management provides and what users want. o (b) what the public thinks accountants should do and what accountants think they can do. o (c) what the governmental agencies want from standard-setting and what the standard- setters provide. o (d) what the users of financial statements want from the government and what is provided
Solution: 1- (d) 2- (d) 3- (d) 4- (a) 5- (a) 6- (b) 7- (d) 8- (b)
E2-5 (Elements of Financial Statements) Ten interrelated elements that are most directly related tomeasuring the performance and financial status of an enterprise are provided below.Assets Distributions to owners ExpensesLiabilities Comprehensive income GainsEquity Revenues LossesInvestments by ownersInstructions Identify the element or elements associated with the 12 items below. (a) Arises from peripheral or incidental transactions. (b) Obligation to transfer resources arising from a past transaction. (c) Increases...