Financial Reporting
Exam Solutions
Course Introduction
Financial Reporting focuses on the principles and practices involved in the preparation, presentation, and interpretation of financial statements for external users. The course covers essential topics such as accounting standards, the conceptual framework underlying financial reporting, and the regulatory environment. Students learn how to analyze and communicate financial information in accordance with generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS), ensuring transparency, comparability, and relevance for decision makers such as investors, creditors, and regulators. Emphasis is placed on understanding key financial statements balance sheet, income statement, statement of cash flows, and statement of changes in equity alongside ethical considerations and the impact of recent developments in the field.
Recommended Textbook
Contemporary Issues in Accounting 2nd Edition by Michaela Rankin
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12 Chapters
226 Verified Questions
226 Flashcards
Source URL: https://quizplus.com/study-set/3296
Page 2
Chapter 1: Contemporary Issues in Accounting
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18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/65391
Sample Questions
Q1) An example of how theory can help to identify problems and deficiencies with current accounting practice and improve accounting practice is:
A)corporate social responsibility theory.
B)the conceptual framework for accounting.
C)agency theory and the conceptual framework for accounting.
D)corporate social responsibility theory and the conceptual framework for accounting.
Answer: D
Q2) Which of the following statements is correct in relation to the purpose of theory?
A)some theories explain,while others describe what is happening.
B)all theories do the same thing.
C)they make suggestions and dictate what action must be taken.
D)theories only make predictions about what will happen in the future.
Answer: A
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Chapter 2: The Conceptual Framework for Financial Reporting
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17 Verified Questions
17 Flashcards
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Sample Questions
Q1) The IASB distinguishes between two types of prudence: I.Cautious prudence
II)Non-cautious prudence
III)Symmetric prudence
IV)Asymmetric prudence
A)I and III.
B)II and IV.
C)II and III.
D)I and IV.
Answer: D
Q2) Accounting standards are seen to be political because:
A)They can influence perceptions about organisations.
B)They can create wealth transfers between different groups in society.
C)They can affect the competitiveness of organisations.
D)All of the above.
Answer: D
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Chapter 3: Standard Setting
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20 Verified Questions
20 Flashcards
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Sample Questions
Q1) Which of the following groups have been criticised for their failure to respond to exposure drafts?
A)Large Australian companies.
B)Auditors.
C)Academics.
D)Analysts.
Answer: C
Q2) Which of the following is a fundamental assumption of Capture Theory?
A)Regulation is costly.
B)People rationally advance their own self-interest.
C)Economic markets are fragile.
D)The market is an efficient market.
Answer: B
Q3) Which of the following is NOT an advantage of accounting regulation?
A)Reduced lobbying to produce favourable outcomes.
B)Increased efficiency in allocating capital.
C)Cheaper production of accounting disclosure.
D)Increased public confidence.
Answer: A
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Page 5
Chapter 4: Measurement
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18 Verified Questions
18 Flashcards
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Sample Questions
Q1) Which of the following is NOT a limitation of measurement in accounting?
A)It is impossible to compare entities over a period of time.
B)There is little agreement on what measurement methods should be used.
C)Measurement can be quite subjective.
D)There are some accounting items that are not easily measured.
Q2) The statement that is true with respect to current cost accounting is:
A)Current operating profit is the excess of the current value of the output sold over the current cost of the related inputs.
B)Gains are recorded only when the assets are disposed of.
C)Holding gains are not included in current operating profits.
D)None of the above is true.
Q3) Intangible assets have been identified as one of the hardest area to value because:
A)It is difficult to measure an asset with no physical substance.
B)They are one of the most important assets on the balance sheet.
C)There are too many markets to choose from.
D)All of the above.
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Chapter 5: Theories in Accounting
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17 Verified Questions
17 Flashcards
Source URL: https://quizplus.com/quiz/65387
Sample Questions
Q1) According to stakeholder theory accounting information:
A)is usually misleading.
B)is seen as largely advertising.
C)is unimportant to most stakeholders.
D)is an important way to communicate with stakeholders.
Q2) Theories in accounting can help us to understand the decisions of:
A)Financial information regulators.
B)Financial information preparers.
C)Financial information users.
D)All of the above.
Q3) Agency theory would hold that managers on compensation contracts which have bonuses tied to a current measure of performance would prefer to:
A)Smooth income using either expensing or capitalising.
B)Be indifferent to expensing or capitalising transactions.
C)Expense transactions rather than capitalise them.
D)Capitalise transactions rather than expense them.
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Chapter 6: Products of the Financial Reporting Process
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20 Verified Questions
20 Flashcards
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Sample Questions
Q1) What is the key element of the IASB definition of the reporting entity?
A)The existence of investors and creditors who cannot directly obtain information.
B)The existence of a broad range of users who want information.
C)The legal requirements of the country in which the entity resides.
D)The existence of scarce resources.
Q2) Income smoothing:
A)Is only possible when sufficient profits are regularly made.
B)Aims to produce a steady growth in the profit stream.
C)Transfers wealth from new shareholders to management.
D)All of the above.
Q3) Manipulation of reported earnings:
A)Affects wealth transfers between the company and others.
B)Can be both legal and illegal.
C)Includes income smoothing.
D)All of the above.
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8
Chapter 7: Corporate Governance
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21 Verified Questions
21 Flashcards
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Sample Questions
Q1) When it comes to corporate governance many commentators have argued the most important factor is:
A)Personal ethics.
B)Strong accounting systems.
C)Harsh legal penalties.
D)Codes of practice.
Q2) Which of the following examples is NOT advantage of good corporate governance?
A)Increasing the cost of capital.
B)Expanding the company's shareholder base.
C)Reducing perceived risks to investors.
D)Increased market confidence.
Q3) An advantage of a principles-based approach to corporate governance is that:
A)It bans loans to directors.
B)It places a higher level of duty on directors to determine which corporate governance practices are required.
C)It requires a corporation to prepare an annual report and provide them to shareholders.
D)All of the options are correct.
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Chapter 8: Capital Markets Research and Accounting
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19 Verified Questions
19 Flashcards
Source URL: https://quizplus.com/quiz/65384
Sample Questions
Q1) Which of the following has been found to suggest that the users of financial statements are either unwilling or unable to unravel the effects of earnings management?
A)Management engaging in 'big bath' accounting.
B)Managers using discretionary accounting to increase their compensation.
C)Managers using income smoothing to increase share price.
D)All of the above.
Q2) Capital markets research focuses on the relationship between:
A)Accounting information and standards setting.
B)Accounting information and capital markets.
C)Capital markets and the economy.
D)Standards setting and accounting information.
Q3) Which of the following is NOT one of the three key assumptions underlying capital markets research:
A)Expectations about dividends determine market price for shares.
B)Accounting information can be used to form expectations about profitability.
C)Expectations about profitability inform expectations about dividends.
D)None of the above,i.e.they are ALL assumptions underlying capital markets research.
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Chapter 9: Earnings Management
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20 Verified Questions
20 Flashcards
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Sample Questions
Q1) Which of the following is NOT likely to be interested in earnings information?
A)Customers.
B)Shareholders.
C)Lenders.
D)None of the above,i.e.they are all interested in earnings information.
Q2) Which of the following is NOT thought to reflect earnings quality?
A)Operating/non-operating mix.
B)Trend in profit results.
C)Total income tax expense for the period.
D)Earnings base.
Q3) Which of the following would be considered fraudulent accounting?
A)Liberal credit terms and estimation of provision for doubtful debts.
B)Recognising revenue when services are prepaid but only partially performed.
C)Capitalising advertising costs.
D)Restating useful life and residual value of non-current assets upwards.
Q4) Which of the following techniques is NOT generally useful to smooth income?
A)Using fair value accounting.
B)Varying the provision for warranties.
C)Hedging of financial instruments.
D)None of the above,they could all be used to smooth income.
Page 11
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Chapter 10: Fair Value Accounting
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20 Flashcards
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Sample Questions
Q1) Which of the following is NOT a transaction cost that should be considered in the calculation of fair value?
A)Costs associated with marketing the item.
B)Transport costs.
C)Agent's selling fees.
D)None of the above,i.e.they are all transaction costs.
Q2) Where there is a difference between fair value at initial recognition and cost,assuming no other standard prohibits it,the entity should?
A)Immediately adjust the value and recognise profit or loss.
B)Ignore the difference as there should be no day one gain or loss.
C)Amortise the difference over the useful life of the item.
D)Pay more or less for the item to make the figures equal.
Q3) Which of the following is NOT part of the old definition of fair value?
A)An arms-length transaction.
B)The amount an asset could be exchanged for.
C)The amount a liability could be settled for.
D)At measurement date.
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Chapter 11: Sustainability and Environmental Accounting
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17 Verified Questions
17 Flashcards
Source URL: https://quizplus.com/quiz/65381
Sample Questions
Q1) Climate change has the ability to impact on traditional financial accounting in what way?
A)Asset Impairment.
B)Risk disclosure.
C)Liability valuation.
D)All of the above.
Q2) The UN's Principles of Responsible Investment have main been adopted by which types of organisations?
A)Institutional Investors.
B)Governments.
C)Mining Companies.
D)Builders.
Q3) ISO 14001 Environmental Management requires certifying companies to assess environmental performance against:
A)Industry benchmarks.
B)Government set standards.
C)Internally developed policies,objectives and targets.
D)Internationally established values.
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13
Chapter 12: International Accounting
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19 Verified Questions
19 Flashcards
Source URL: https://quizplus.com/quiz/65380
Sample Questions
Q1) Gray adapted Hofstede's categories for accounting,which of the following is not one of his four accounting values?
A)Secrecy versus Transparency.
B)Conservatism versus Optimism.
C)Uniformity versus Flexibility.
D)Short-term versus Long-term Orientation.
Q2) In Australia IFRSs are required to be used by:
A)All listed entities.
B)Consolidated entities only.
C)All reporting entities.
D)Multinational Entities.
Q3) With harmonisation of accounting practices globally:
A)Environmental and cultural factors still lead to diversity in practice.
B)Financial reporting is becoming simpler.
C)International accounting differences have all but disappeared.
D)All of the above.
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