CHAPTER 1
THE ENVIRONMENT AND CONCEPTUAL FRAMEWORK OF FINANCIAL REPORTING IFRS questions are available at the end of this chapter. TRUE -FALSE —Conceptual 1.Financial statements are the principal means through which a company communicates it s
financial information to those outside it.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Know ledge, AICPA BC: None, AICPA AC: Reporting , AICPA PC: None , IMA: Reporting & Control: Financial Statement Preparation , IFRS: None 2.Users of financial reports of a company use the information provided by these reports t o
make capital allocation decisions.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge , AICPA BC: None, AICPA AC: Reporting , AICPA PC: None , IMA: Reporting & Control : Financ ial Statement Preparation , IFRS: None 3.An effective process of capital allocation provides an efficient market for buying and selling
securities and obtaining and granting credit.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowl edge, AICPA BC: None, AICPA AC: Reporting , AICPA PC: None , IMA: Reporting & Control: Financial Statement Preparation , IFRS: None 4.Investors are interested in financial reporting because it provides information that is usefu l
for making decisions .
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge , AICPA BC: None, AICPA AC: Reporting , AICPA PC: None , IMA: Reporting & Control: Financial Statement Preparation , IFRS: None 5.Users of financial accounting statements have both coin ciding and conflicting needs for
information of various types.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge , AICPA BC: None, AICPA AC: Reporting , AICPA PC: None , IMA: Reporting & Control: Financial Statement Preparation , IFRS: N one 6.Although th e FASB has developed a conceptual framework, no Statements of Financial
Accounting Concepts have been issued to date.
Ans: F, LO: 1, Bloom: K, Difficulty: Moderate, Min: 1, AACSB: Knowledge , AICPA BC: None, AICPA AC: Reporting , AICPA PC: None , IMA: Report ing & Control: Financial Statement Analysis, IFRS: None 7.The passage of a new FASB Accounting Standards Update requires the support of five o f
the seven board members.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None , AICPA AC: Reporting , AICPA PC: None , IMA: Reporting & Control: Financial Statement Preparation , IFRS: None 8.Statements of Financial Accounting Concepts set forth fundamental objectives and
concepts that are used by the FASB in developing future stand ards of financial accounti ng
and reporting.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge , AICPA BC: None, AICPA AC: Reporting , AICPA PC: None , IMA: Reporting & Control: Financial Statement Analysis, IFRS: None 9.The FASB’s C odification creates a new set of GAAP.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge , AICPA BC: None, AICPA AC: Reporting , AICPA PC: None , IMA: Reporting & Control: Financial Statement Analysis, IFRS: N one Test Bank for Intermediate Accounting 18e Kieso
