Chapter 1 cengage – Flashcards

What drives the demand for financial accounting information? I. The need for information to make resource allocation decisions. II. The need to compete for and attract scarce economic resources.

Information asymmetry arises from

The principles covered in the Code of Professional Conduct include all of the following except:

Which of the following is/are not true with respect to the role that the ETF plays in assisting the FASB with standard setting? I. Identifying significant emerging accounting issues (i.e., unique transactions and accounting problems), which it feels the FASB should address. II. Developing consensus positions on the implementation issues involving the application of standards. III. Simplifying user access by organizing and categorizing (codifying) all authoritative U.S. GAAP in one database. IV. Creating a codification research system that is up to date, including the most recently updated standards.

The professional accountant serves the (blank) and owes a responsibility of ethics and fairness to (blank) that depend on the information produced by the accountant.

Pronouncements that provide clarification of conflicting or unclear issues relating to previously issued FASB Statements of Standards, APB Opinions, or Accounting Research Bulletins.

Issued by the FASB to provide guidance on accounting and reporting problems related to Statements of Standards or Interpretations.

Pronouncements of the APB that constitute generally accepted accounting principles unless specifically amended or rescinded.

Issued by the FASB as a series establishing a theoretical foundation upon which to base financial accounting and reporting standards.

Pronouncements of the Committee on Accounting Procedure (CAP) that constitute generally accepted accounting principles unless superceded or amended by the FASB.

Pronouncements issued by the FASB that establish generally accepted accounting principles and indicate the methods and procedures required on specific accounting issues.

Pronouncements issued to provide more timely and consistent application guidance in regard to FASB literature.

Both the FASB and the IASB (blank). (blank) requires the approval of at least 9 members to issue a new accounting standard.

The primary stakeholders that are important users of financial information include all of the following except:

The balance sheet reports the following equality:

The notes to the financial statements do all of the following except:

(blank) face less risk of loss of their investments, stand to enjoy (blank), and tend to focus more on

Which of the following is correct regarding GAAP? I. GAAP stands for generally accepted auditing practices. II. U.S. companies subject to SEC regulation must follow GAAP.

The FASB's process for issuing an Accounting Standard update is comprised of a series of steps. Arrange the following steps into its correct sequence in this process: I. Appoints a task force II. Conducts research III. Issues Exposure Draft IV. Issues Discussion Memorandum or Invitation to Comment

The statement of shareholders' equity (sometimes called the statement of changes in shareholders' equity) provides information about the (blank) on the company. The year-end amounts reported in this statement for the various (blank) will match the amounts reported in the (blank) of the balance sheet. Equity investors will be particularly interested in the information provided in this statement.

Which of the following statements most correctly describes the process being followed by the FASB and the IASB? I. The two Boards collaborate through joint projects to develop common standards. II. The two Boards are working separately on high-quality accounting standards for domestic financial reporting. III. The IASB has reaffirmed its commitment to convergence with U.S. GAAP and has identified a number of major projects to achieve its goal of convergence.

International Financial Reporting Standards (IFRS) are:

Research studies and other information cited in the text for changes in stock prices associated with changes in earnings show: I. The sign of the change in earnings (increase or decrease) was associated with a 10.0% stock return differential in one year. II. Analysts and investors spend enormous amounts of time and energy developing forecasts of earnings changes and making investment decisions in stocks on the basis of their earnings expectations.

Which of the following address issues that arise from biases in a self-reporting accounting system? I. Professionally established accounting standards II. Independent audits

The FASB is responsible for: I. Identifying financial accounting issues II. Conducting research to address financial accounting issues III. Issuing accounting standards to address governmental accounting issues IV. Implementing accounting standards to ensure compliance

Cash flow information is most useful to (blank) because the statement of cash flows helps them evaluate the (blank)

New accounting standards issued by the FASB and the IASB are sometimes (blank) The benefits of complying with these new standards are (blank)

The role(s) of financial accounting include to: