Exam (elaborations) TEST BANK FOR Intermediate Accounting IFRS Edition Volume 1 By Kieso Weygandt and Warfield

Financial Reporting and Accounting Standards ASSIGNMENT CLASSIFICATION TABLE Topics Questions Cases 1. Global markets. 1 2. Environment of accounting. 2, 3, 4 4, 5, 7 3. Objective of financial reporting. 5, 6, 7, 8, 9, 10 2 4. Standard-setting organizations. 11, 12, 13, 14, 15, 16, 17, 18 1, 3, 6 5. Financial reporting challenges. 19, 20, 21, 22, 23, 24, 25 8, 9, 10 6. Ethical issues. 26 11, 12, 16 *7. Authoritative U.S. pronouncements and policy-setting bodies. 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38 13, 14, 15 *These questions and cases address material in the appendix to the chapter. To download more slides, ebook, solutions and test bank, visit 1-2 Copyright © 2011 John Wiley & Sons, Inc. Kieso, IFRS, 1/e, Solutions Manual (For Instructor Use Only) ASSIGNMENT CHARACTERISTICS TABLE Item Description Level of Difficulty Time (minutes) CA1-1 IFRS and standard-setting. Simple 5–10 CA1-2 IFRS and standard-setting. Simple 5–10 CA1-3 Financial reporting and accounting standards. Simple 15–20 CA1-4 Financial accounting. Simple 15–20 CA1-5 Need for IASB. Simple 15–20 CA1-6 IASB role in standard-setting. Simple 15–20 CA1-7 Accounting numbers and the environment. Simple 10–15 CA1-8 Politicalization of IFRS. Complex 15–20 CA1-9 Models for setting IFRS. Simple 10–15 CA1-10 Economic consequences. Moderate 25–35 CA1-11 Rule-making Issues. Complex 20–25 CA1-12 Financial reporting pressures. Moderate 25–35 *CA1-13 GAAP terminology. Moderate 20–30 *CA1-14 Accounting organizations and documents issued. Simple 3–5 *CA1-15 Accounting pronouncements. Simple 5–7 CA1-16 GAAP and economic consequences. Moderate 25–35 To download more slides, ebook, solutions and test bank, visit Copyright © 2011 John Wiley & Sons, Inc. Kieso, IFRS, 1/e, Solutions Manual (For Instructor Use Only) 1-3 ANSWERS TO QUESTIONS 1. World markets are becoming increasingly intertwined. The tremendous variety and volume of both exported and imported goods indicates the extensive involvement in international trade. As a result, the move towards adoption of international financial reporting standards has and will continue in the future. 2. Financial accounting measures, classifies, and summarizes in report form those activities and that information which relate to the enterprise as a whole for use by parties both internal and external to a business enterprise. Managerial accounting also measures, classifies, and summarizes in report form enterprise activities, but the communication is for the use of internal, managerial parties, and relates more to subsystems of the entity. Managerial accounting is management decision oriented and directed more toward product line, division, and profit center reporting. 3. Financial statements generally refer to the four basic financial statements: statement of financial position, income statement, statement of cash flows, and statement of changes in equity. Financial reporting is a broader concept; it includes the basic financial statements and any other means of communicating financial and economic data to interested external parties. 4. If a company’s financial performance is measured accurately, fairly, and on a timely basis, the right managers and companies are able to attract investment capital. To provide unreliable and irrelevant information leads to poor capital allocation which adversely affects the securities market. 5. The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers. 6. General purpose financial statements provide financial reporting information to a wide variety of users. To be cost effective in providing this information, general purpose financial statements provide at the least cost the most useful information possible. 7. Shareholders, creditors, suppliers, employees, and regulators all use general purpose financial statements. The primary user group is capital providers (shareholders and creditors). 8. The proprietary perspective is not considered appropriate because this perspective generally does not reflect a realistic view of the financial reporting environment. Instead the entity perspective is adopted which is consistent with the present business environment where most companies engaged in financial reporting have substance distinct from their investors. 9. The objective of financial reporting is primarily to provide information to investors interested in assessing the company’s ability to generate net cash inflows and management’s ability to protect and enhance the capital providers’ investments. Financial reporting should help investors assess the amounts, timing and uncertainty of prospective cash inflows. 10. A single set of high quality accounting standards ensures adequate comparability. Investors are able to make better investment decisions if they receive financial information from a U.S. company that is comparable to an international competitor. 11. The two organizations involved in international standard-setting are IOSCO (International Organization of Securities Commissions) and the IASB (International Accounting Standards Board.) The IOSCO does not set accounting standards, but ensures that the global markets can operate in an efficient and effective manner. Conversely, the IASB’s mission is to develop a single set of high quality, understandable and international financial reporting standards (IFRSs) for general purpose financial statements. To download more slides, ebook, solutions and test bank, visit 1-4 Copyright © 2011 John Wiley & Sons, Inc. Kieso, IFRS, 1/e, Solutions Manual (For Instructor Use Only) Questions Chapter 1 (Continued) 12. The Financial Accounting standards Board (FASB) is an independent organization whose mission is to establish and improve standards of financial accounting and reporting for U.S. companies. 13. The purpose of the IOSCO is to facilitate cross-border cooperation, reduce global systemic risk, protect investors, and ensure fair and efficient securities markets. 14. The mission of the IASB is to develop, in the public interest, a single set of high quality, understandable and international financial reporting standards (IFRSs) for general purpose financial statements. 15. The IASB preliminary views are based on research and analysis conducted by the IASB staff. IASB exposure drafts are issued after the Board evaluates research and public response to preliminary views. IASB standards are issued after the Board evaluates responses to the exposure draft. 16. IASB standards are financial accounting standards issued by the IASB and are referred to as International Financial Reporting Standards (IFRS). The IASB Framework for financial reporting sets forth fundamental objectives and concepts that the Board uses in developing future standards of financial reporting. The intent of the Framework is to form a cohesive set of interrelated concepts that will serve as tools for solving existing and emerging problems in a consistent manner. 17. International Financial Reporting Standards are the most authoritative, followed by International Financial Reporting Interpretations then the IASB framework. 18. The International Financial Reporting Interpretations Committee (IFRIC) applies a principles-based approach in providing interpretative guidance. The IFRIC issues interpretations that cover newly identified financial reporting issues not specifically dealt with in IFRS, and issues where conflicting interpretations have developed, or seem likely to develop in the absence of authoritative guidance. 19. Some major challenges facing the accounting profession relate to the following items: Nonfinancial measurement—how to report significant key performance measurements such as customer satisfaction indexes, backlog information and reject rates on goods purchased. Forward-looking information—how to report more future oriented information. Soft assets—how to report on intangible assets, such as market know-how, market dominance, and well-trained employees. Timeliness—how to report more real-time information. 20. The sources of pressure are innumerable, but the most intense and continuous pressure to change or influence the development of IFRS come from individual companies, industry associations, governmental agencies, practicing accountants, academicians, professional accounting organizations, and investing public. To download more slides, ebook, solutions and test bank, visit Copyright © 2011 John Wiley & Sons