Question 1

What does the political legitimacy argument,as outlined by Hines (1991) ,suggest?

Accepted Answer

A)   The accounting profession consists of experts in technical knowledge of accounting and should therefore be given authority to regulate accounting.
B)   The accounting profession used the development of the conceptual framework as a strategy to promote their self-regulation interests.
C)   The conceptual framework provides the authority to resolve technical issues with authority and legitimacy.
D)   As users are politically involved in developing the conceptual framework, the outcome has political legitimacy.E) A) and B)
F) B) and C)

Question 2

What is the definition of a 'conceptual framework'?

Accepted Answer

A)   A conceptual framework is a set of prescriptions of what accounting should be.
B)   A conceptual framework is a structured positive theory of accounting.
C)   A conceptual framework is a coherent system of objectives and fundamentals that are expected to lead to consistent standards.
D)   A conceptual framework is a group of independent concepts on specific accounting issues, that are grouped together to provide a single reference.E) B) and D)
F) C) and D)

Question 3

Which of the following is not a characteristic of a liability,according to the IASB Conceptual Framework?

Accepted Answer

A)   A future deposition or transfer of economic benefits to others will occur.
B)   A past transaction or event is to have created the obligation.
C)   There must be a legal obligation.
D)   None of the given options are correct.E) C) and D)
F) A) and C) C

Question 4

Which of the following will satisfy the definition of a 'constructive liability',as outlined in the IASB Conceptual Framework?

Accepted Answer

A)   A decision by management to carry out maintenance over the next two years
B)   A public offer to repair a defective good, even if it is out of warranty
C)   A parent company's guarantee to meet the debts of a subsidiary entity if the subsidiary itself cannot pay them
D)   All of the given options are correct.E) A) and B)
F) All of the above B

Question 5

Which of the following is correct about the concept of 'control' in the recognition of assets?

Accepted Answer

A)   Control relates to the capacity of a reporting entity to benefit from an asset and to deny or regulate the access of others to the benefit.
B)   The capacity to control would not normally stem from legal rights.
C)   Control is not required before an asset can be shown within the body of an entity's balance sheet (statement of financial position) .
D)   Controlled assets are always owned.E) None of the above
F) B) and C)

Question 6

Which characteristic of information,when omitted or misstated,could influence economic decisions taken by users on the basis of financial statements?

Accepted Answer

A)   Relevance
B)   Reliability
C)   Materiality
D)   ComparabilityE) B) and C)
F) A) and C)

Question 7

Which of the following is not a characteristic of an asset,according to the IASB Conceptual Framework?

Accepted Answer

A)   There is an expected future economic benefit.
B)   The entity must have ownership over the resource giving rise to the future economic benefits.
C)   The transaction or event giving rise to the ownership over future economic benefits must have occurred.
D)   The reporting entity must have control over the resource to benefit from it, or to deny or regulate the access of others to the benefit.E) A) and B)
F) None of the above

Question 8

According to the IASB,a conceptual framework:

Accepted Answer

A)   Is a coherent system of concepts that flow from an objective
B)   Provides guidance on identifying the boundaries of financial reporting in selecting the transactions, other events and circumstances to be represented
C)   Outlines how transactions should be recognised and measured (or disclosed) 
D)   All of the given options are correct.E) B) and C)
F) A) and D)

Question 9

Which of the following is an enhancing qualitative characteristics identified by the IASB Conceptual Framework?

Accepted Answer

A)   Comparability and faithful representation
B)   Relevance and timeliness
C)   Timeliness and verifiability
D)   Understandability and reliabilityE) B) and D)
F) All of the above

Question 10

Which of the following cannot be concluded from an overview of the history of the development of conceptual framework projects?

Accepted Answer

A)   A number of countries have successfully completed conceptual framework projects.
B)   Those responsible for them have either been reluctant to promote significant changes, or the changes suggested have not been accepted.
C)   Conceptual framework projects have been reluctant to prescribe a particular valuation or measurement approach.
D)   The conceptual framework is a continuous and evolving project.E) All of the above
F) A) and B)

Question 11

On what criteria is a 'reporting entity',as defined in SAC 1,dependent?

Accepted Answer

A)   Whether there are users that are dependent on the reports to make or evaluate resource decisions
B)   Professional judgment providing some guidelines to help make a decision
C)   Whether there are users that are dependent on the reports to make or evaluate resource decisions, and professional judgement provides some guidelines to help make a decision
D)   The Corporations Law based on measures of gross revenue, dollar value of assets and the number of employeesE) A) and B)
F) B) and D)

Question 12

Which of the following is a characteristic of reliability?

Accepted Answer

A)   It influences economic decisions.
B)   It represents faithfully what it purports to represent.
C)   It provides predictive value and feedback to confirm or correct earlier expectations.
D)   None of the given options are correct.E) B) and C)
F) A) and B)

Question 13

The objective of general purpose financial reporting is stated in most conceptual frameworks as providing decision-useful information to users of financial reports.Which of the following is not regarded as a legitimate user of financial reports according to the IASB Conceptual Framework?

Accepted Answer

A)   Users without some proficiency in financial accounting
B)   Recipients of goods and services
C)   Special interest groups in the general public
D)   All of the given options are correct.E) B) and D)
F) None of the above

Question 14

Conceptual frameworks provide prescription so they are considered to be:

Accepted Answer

A)   Normative theories of accounting
B)   Positive theories of accounting
C)   Decision usefulness theory of accounting
D)   None of the given options are correct.E) All of the above
F) A) and B) A

Question 15

In Australia,according to SAC 2 'Objective of General-Purpose Financial Reporting',the primary user groups(s) of general purpose financial reports are:

Accepted Answer

A)   Resource providers
B)   Recipients of goods and services
C)   Parties performing a review or oversight function
D)   All of the given options are correct.E) A) and B)
F) A) and C)

Question 16

What is the objective of financial reporting,as stated in the IASB Framework for the Preparation and Presentation of Financial Reports,and consistent with the Australian SAC 2: Objectives of Financial Reporting?

Accepted Answer

A)   Stewardship
B)   Accountability
C)   Decision usefulness
D)   All of the given options are correct.E) All of the above
F) None of the above

Question 17

Over time,a number of objectives have been attributed to information provided within financial statements.Which of the following is not an objective of financial statements?

Accepted Answer

A)   To enable outsiders to assess the stewardship of management.
B)   To provide information to users that is useful for making and evaluating decisions about the allocation of scarce resources.
C)   To enable reporting entities to demonstrate accountability between the entity and those parties to which the entity is deemed to be accountable.
D)   To help managers to maximise their own wealth and the wealth of the organisation.E) None of the above
F) B) and D)

Question 18

The components,or building blocks,in the IASB Framework for the Preparation and Presentation of Financial Statements do not include:

Accepted Answer

A)   The definition of 'financial reporting'
B)   Definition of users and their needs
C)   Underlying assumptions
D)   Accounting standardsE) B) and C)
F) All of the above

Question 19

What is the purpose of developing a conceptual framework?

Accepted Answer

A)   To provide a coherent structure to accounting practice which had developed in an ad hoc way.
B)   To guide standard-setters to develop standards based on the same concepts and principles, rather than in a piecemeal approach.
C)   To guide users where there is no accounting standard covering an issue.
D)   All of the given options are correct.E) A) and D)
F) None of the above

Question 20

Which of the following is a qualitative characteristic of financial information in general purpose financial reports,if they are to be useful?

Accepted Answer

A)   Understandability
B)   Comparability
C)   Reliability
D)   All of the given options are correct.E) A) and B)
F) A) and C)

Exam 6: Normative Theories of Accounting: The Case of Conceptual Framework Projects

What does the political legitimacy argument,as outlined by Hines (1991) ,suggest?

Correct AnswerverifiedShow Answer

What is the definition of a 'conceptual framework'?

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of a liability,according to the IASB Conceptual Framework?

Correct AnswerverifiedC

Which of the following will satisfy the definition of a 'constructive liability',as outlined in the IASB Conceptual Framework?

Correct AnswerverifiedB

Which of the following is correct about the concept of 'control' in the recognition of assets?

Correct AnswerverifiedShow Answer

Which characteristic of information,when omitted or misstated,could influence economic decisions taken by users on the basis of financial statements?

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of an asset,according to the IASB Conceptual Framework?

Correct AnswerverifiedShow Answer

According to the IASB,a conceptual framework:

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Which of the following is an enhancing qualitative characteristics identified by the IASB Conceptual Framework?

Correct AnswerverifiedShow Answer

Which of the following cannot be concluded from an overview of the history of the development of conceptual framework projects?

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On what criteria is a 'reporting entity',as defined in SAC 1,dependent?

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Which of the following is a characteristic of reliability?

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The objective of general purpose financial reporting is stated in most conceptual frameworks as providing decision-useful information to users of financial reports.Which of the following is not regarded as a legitimate user of financial reports according to the IASB Conceptual Framework?

Correct AnswerverifiedShow Answer

Conceptual frameworks provide prescription so they are considered to be:

Correct AnswerverifiedA

In Australia,according to SAC 2 'Objective of General-Purpose Financial Reporting',the primary user groups(s) of general purpose financial reports are:

Correct AnswerverifiedShow Answer

What is the objective of financial reporting,as stated in the IASB Framework for the Preparation and Presentation of Financial Reports,and consistent with the Australian SAC 2: Objectives of Financial Reporting?

Correct AnswerverifiedShow Answer

Over time,a number of objectives have been attributed to information provided within financial statements.Which of the following is not an objective of financial statements?

Correct AnswerverifiedShow Answer

The components,or building blocks,in the IASB Framework for the Preparation and Presentation of Financial Statements do not include:

Correct AnswerverifiedShow Answer

What is the purpose of developing a conceptual framework?

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Which of the following is a qualitative characteristic of financial information in general purpose financial reports,if they are to be useful?

Correct AnswerverifiedShow Answer

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