Test Bank for Financial Accounting
Theory and Analysis-Text and Cases
15th Edition by
Schroeder, Clark, Cathey
ISBN: 9781394336531
Answer d
15. Which of the following types of pronouncements are intended to establish the objectives and concepts that the FASB will use in developing standards of financial accounting and reporting?
a. Statements of Concepts
b. Statements of Financial Accounting Standards
c. APB Opinions
d. Accounting Standards Updates
Answer a
16. What is the purpose of Emerging Issues Task Force?
a. Provide interpretation of existing standards.
b. Provide timely guidance on select issues.
c. Provide implementation guidance within the Codification framework to reduce diversity in practice on a timely basis.
d. Provide interpretive guidance
Answer c
17. What is one of the main criticisms regarding the standard-setting process for small businesses?
a. US GAAP requirements are developed primarily for large international firms.
b. US GAAP requirements are often irrelevant to small business financial reporting needs and can violate the cost-benefit constraint.
c. US GAAP requirements are based solely on the needs of government agencies.
d. US GAAP requirements exclusively focus on differential disclosure standards for small businesses.
Answer b
18. Whichofthefollowingisnot aconsequenceofthestandardsoverloadproblemtosmallbusinesses?
a. If a small business omits a GAAP requirement from audited financial statements, a qualified or adverse opinion may be rendered.
b. Small businesses do not need to keep financial records
c. The cost of complying with GAAP requirements may cause a small business to forgo the development of other, more relevant information.
d. Small CPA firms that audit smaller companies must keep up to date on all the same requirements as large international firms, but they cannot afford the specialists that are available on a centralized basis in the large firms.
Answer b
19. Some accountants maintain that accounting standards are as much a product of political action as they are of careful logic or empirical findings. This belief is an example of the concept of
a. Standard setting as a political process
b. Standards overload
c. Economic consequences
d. The role of ethics in accounting
Answer a
20. Financial accounting standard-setting in the United States can be described as:
a. A democratic process in the sense that a majority of accountants must agree with a standard before it becomes enforceable.
b. A research process based on empirical findings
c. A political process which reflects actions of various interested user groups as well as a product of research and logic.
d. A legalistic process based on rules promulgated by governmental agencies
Answer c
21. The impact of accounting reports on various segments of our economic society is the definition of the concept of
a. Standard setting as apolitical process
b. Standards overload
c. Economic consequences
d. The role of ethics in accounting
Answer c
22. Considering and understanding how business decisions affect the financial statements is
a. The sole responsibility of the Securities and Exchange Commission.
b. Provided in the auditor’s report.
c. Referred to as an economic consequence perspective.
d. Interpreted strictly by the company’s suppliers.
Answer c
23. Economic consequences of accounting standard-setting means:
a. Standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.
b. Standard-setters must ensure that no new costs are incurred when a new standard is issued.
c. The objective of financial reporting should be politically motivated to ensure acceptance bythe general public.
d. Accounting standards can have detrimental impacts on the wealth levels of the providers of financial information.
29. What was one of the primary goals of the FASB in developing the Accounting Standards Codification (ASC)?
a. To delay the implementation of new accounting standards.
b. To create a codification research system that remains up to date with released standardsetting activity.
c. To replace the need for any accounting research system.
d. To eliminate the requirement for financial statements to follow US GAAP.
Answer b
30. All the following are true regarding the FASB Accounting Standards Codification except:
a. The Codification changes the way GAAP is documented, presented, and updated.
b. The goal of the Codification was to provide one place where all authoritative literature about a particular topic could be found.
c. The purpose of the Codification is to create new GAAP.
d. The Codification was created to simplify user access.
Answer c
31. International Financial Reporting Standards (IFRS) are issued by the:
a. EU (European Union).
b. SEC (Securities and Exchange Commission).
c. FASB (Financial Accounting Standards Board).
d. IASB (International Accounting Standards Board).
Answer d
Essay
1. What is the difference between normative and positive theory?
Normativetheoriesexplainwhat should be, whereas positivetheories explain whatis. Ideally,there should be no such distinction, because a well-developed and complete theory encompasses both what should be and what is.
2. Why is the development of a general theory of accounting important?
The development of a general theory of accounting is important because of the role accounting plays in our economic society. We live in a capitalistic society, which is characterized by a selfregulated market that operates through the forces of supply and demand. Goods and services are available for purchase in markets, and individuals are free to enter or exit the market to pursue their economic goals. All societies are constrained by scarce resources that limit the attainment of all individual or group economic goals. In our society, the role of accounting is to report how organizations use scarce resources and to report on the status of resources and claims to resources.
3. Discuss the evolution of accounting during the 1930s.