,Solution manual for Intermediate Accounting,
IFRS, 4e Kieso
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Our email :
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, CHAPTER 1
Financial Reporting and Accounting Standards
ASSIGNMENT CLASSIFICATION TABLE
Topics Questions Concepts for
Analysis
1. Global markets and financial reporting. 1, 2, 3, 4 4
2. Objective of financial reporting. 5, 6, 7, 8, 9, 10 2, 3
3. Standard-setting organizations. 11, 12, 13, 14, 1, 2, 3, 5, 6, 8, 9,
15, 16, 17, 18 11
4. Financial reporting challenges. 19, 20, 21, 22, 3, 7, 8, 10, 11, 12
23, 24, 25
Copyright © 2020 Wiley Kieso, IFRS,4/e, Solutions Manual (For Instructor Use Only) 1-1
,ASSIGNMENT CHARACTERISTICS TABLE
Level of Time
Item Description Difficulty (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 10–15
CA1.11 Rule-making Issues. Complex 20–25
CA1.12 Financial reporting pressures. Moderate 25–35
1-2 Copyright © 2020 Wiley Kieso, IFRS, 4/e, Solutions Manual (For Instructor Use Only)
, 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.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
3. Financial statements generally refer to the four basic financial statements: statement of financial
position, statement of comprehensive income (or 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.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
5. 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.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
6. 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 about providing resources to the entity.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
7. 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.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
8. Shareholders, creditors, suppliers, employees, and regulators all use general-purpose financial
statements. The primary user group is capital providers (shareholders and creditors).
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
9. 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 separate and distinct from their owners.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
Copyright © 2020 Wiley Kieso, IFRS,4/e, Solutions Manual (For Instructor Use Only) 1-3
,Questions Chapter 1 (Continued)
10. This statement is not correct. 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.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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, enforceable and global financial reporting standards (IFRSs) for general-
purpose financial statements.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
12. IOSCO (International Organization of Securities Commissions) is an association of organizations
that regulate the world’s securities markets. Members are generally the main financial regulators
for a given country. IOSCO does not set accounting standards.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
13. The mission of the IASB (International Accounting Standards Board) is to develop, in the public
interest, a single set of high quality, enforceable global international financial reporting standards
(IFRSs) for general-purpose financial statements.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
14. The purpose of the Monitoring Board is to establish a link between accounting standard-setters
and those public authorities (such as IOSCO) that generally oversee accounting standard-setters.
This board also provides political legitimacy to the overall organization.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
16. IASB International Financial Reporting Standards are financial accounting standards issued by the
IASB and are referred to as International Financial Reporting Standards (IFRS). The IFRS
Conceptual 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
Conceptual 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.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
17. In ranking from the most authoritative to least authoritative, International Financial Reporting
Standards are the most authoritative, followed by International Financial Reporting Standard
Interpretations and then the Conceptual Framework for Financial Reporting.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
1-4 Copyright © 2020 Wiley Kieso, IFRS, 4/e, Solutions Manual (For Instructor Use Only)
,Questions Chapter 1 (Continued)
18. The International Financial Reporting Standards 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.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
21. Economic consequences means the impact of accounting reports on the wealth positions of
issuers and users of financial information, and the decision-making behavior resulting from that
impact. In other words, accounting information impacts various users in many different ways which
leads to wealth transfers among these various groups.
If politics plays an important role in the development of accounting rules, the rules will be subject
to manipulation for the purpose of furthering whatever policy prevails at the moment. No matter
how well intentioned the rule-maker may be, if information is designed to indicate that investing in
a particular enterprise involves less risk than it actually does, or is designed to encourage
investment in a particular segment of the economy, financial reporting will suffer an irreplaceable
loss of credibility.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
22. No one particular proposal is expected in answer to this question. The students’ proposals,
however, should be defensible relative to the following criteria:
(1)The method must be efficient, responsive, and expeditious.
(2)The method must be free of bias and be above or insulated from pressure groups.
(3)The method must command widespread support if it does not have legislative authority.
(4)The method must produce sound yet practical accounting principles or standards.
The students’ proposals might take the form of alterations of the existing methodology, an accoun-
ting court (as proposed by Leonard Spacek), or governmental device.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
23. Concern exists about fraudulent financial reporting because it can undermine the entire financial
reporting process. Failure to provide information to users that is accurate can lead to inappropriate
allocations of resources in our economy. In addition, failure to detect massive fraud can lead to
additional governmental oversight of the accounting profession.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
Copyright © 2020 Wiley Kieso, IFRS,4/e, Solutions Manual (For Instructor Use Only) 1-5
,Questions Chapter 1 (Continued)
24. The “expectations gap” is the difference between what people think accountants should be doing
and what accountants think they can do. It is a difficult gap to close. The accounting profession
recognizes it must play an important role in narrowing this gap. To meet the needs of society, the
profession is continuing its efforts in developing accounting standards, such as numerous
pronouncements issued by the IASB, to serve as guidelines for recording and processing business
transactions in the changing economic environment.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
25. Accountants must perceive the moral dimensions of some situations because IFRS does not
define or cover all specific features that are to be reported in financial statements. In these
instances, accountants must choose among alternatives. These accounting choices influence
whether particular stakeholders may be harmed or benefited. Moral decision-making involves
awareness of potential harm or benefit and taking responsibility for the choices.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
1-6 Copyright © 2020 Wiley Kieso, IFRS, 4/e, Solutions Manual (For Instructor Use Only)
, TIME AND PURPOSE OF CONCEPTS FOR ANALYSIS
CA 1.1 (Time 5–10 minutes)
Purpose—to provide the student with an opportunity to answer questions about IFRS and standard-
setting.
CA 1.2 (Time 5–10 minutes)
Purpose—to provide the student with an opportunity to answer questions about IFRS and standard-
setting.
CA 1.3 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to answer questions about financial reporting and
standard-setting.
CA 1.4 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to distinguish between financial accounting and
managerial accounting, identify major financial statements, and differentiate financial statements and
financial reporting.
CA 1.5 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to evaluate the viewpoint of removing mandatory
accounting rules and allowing each company to voluntarily disclose the information it desired.
CA 1.6 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to identify the sponsoring organization of the IASB,
the method by which the IASB arrives at a decision, and the types and the purposes of documents
issued by the IASB.
CA 1.7 (Time 10–15 minutes)
Purpose—to provide the student with an opportunity to describe how reported accounting numbers
might affect an individual’s perceptions and actions.
CA 1.8 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to focus on the types of organizations involved in
the rule making process, what impact accounting has on the environment, and the environment’s
influence on accounting.
CA 1.9 (Time 10–15 minutes)
Purpose—to provide the student with an opportunity to focus on what type of rule-making environment
exists. In addition, this CA explores why user groups are interested in the nature of IFRS and why some
groups wish to issue their own rules.
CA 1.10 (Time 10–15 minutes)
Purpose—to provide the student with the opportunity to discuss the role of government officials in
accounting rule-making.
CA 1.11 (Time 20–25 minutes)
Purpose—to provide the student with an opportunity to consider the ethical dimensions of
implementation of a new accounting pronouncement.
CA 1.12 (Time 25–35 minutes)
Purpose—to provide the student with a writing assignment concerning the ethical issues related to
meeting earnings targets.
Copyright © 2020 Wiley Kieso, IFRS,4/e, Solutions Manual (For Instructor Use Only) 1-7
, SOLUTIONS TO CONCEPTS FOR ANALYSIS
CA 1.1
1. True.
2. False. Any company claiming compliance with IFRS must comply with all standards and
interpretations, including disclosure requirements.
3. False. The IFRS advisory council provides advice and counsel to the IASB on major policies and
technical issues. It is not a governmental body.
4. True.
5. False. The IASB has no government mandate and does follow a due process in issuing IFRS.
LO: 3, Bloom: K, Difficulty: Simple, Time: 5-10, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
CA 1.2
1. False. The objective emphasizes an entity perspective, not a stewardship approach.
2. False. The objective of 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, not preparing the financial statements.
3. False. International Accounting Standards were issued by the International Accounting Standards
Committee while International Financial Reporting Standards are issued by the IASB. Both have
authoritative support.
4. True.
LO: 2,3, Bloom: K, Difficulty: Simple, Time: 5-10, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
CA 1.3
1. c. 2. d. 3. c. 4. d. 5. b. 6. a. 7. a. 8. b. 9. d. 10. b.
LO: 2,3, Bloom: K, Difficulty: Simple, Time: 15-20, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
CA 1.4
(a) Financial accounting is the process that culminates in the preparation of financial reports relative
to the enterprise as a whole for use by parties both internal and external to the enterprise. In
contrast, managerial accounting is the process of identification, measurement, analysis, and
communication of financial information used by the management to plan, evaluate, and control
within an organization and to assure appropriate use of, and accountability for, its resources.
(b) The financial statements most frequently provided are the statement of financial position, the
statement of comprehensive income (or income statement), the statement of cash flows, and the
statement of changes in equity.
1-8 Copyright © 2020 Wiley Kieso, IFRS, 4/e, Solutions Manual (For Instructor Use Only)
IFRS, 4e Kieso
Hello all ,
We have all what you need with best price
Our email :
Our website :
testbanks-store.com
, CHAPTER 1
Financial Reporting and Accounting Standards
ASSIGNMENT CLASSIFICATION TABLE
Topics Questions Concepts for
Analysis
1. Global markets and financial reporting. 1, 2, 3, 4 4
2. Objective of financial reporting. 5, 6, 7, 8, 9, 10 2, 3
3. Standard-setting organizations. 11, 12, 13, 14, 1, 2, 3, 5, 6, 8, 9,
15, 16, 17, 18 11
4. Financial reporting challenges. 19, 20, 21, 22, 3, 7, 8, 10, 11, 12
23, 24, 25
Copyright © 2020 Wiley Kieso, IFRS,4/e, Solutions Manual (For Instructor Use Only) 1-1
,ASSIGNMENT CHARACTERISTICS TABLE
Level of Time
Item Description Difficulty (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 10–15
CA1.11 Rule-making Issues. Complex 20–25
CA1.12 Financial reporting pressures. Moderate 25–35
1-2 Copyright © 2020 Wiley Kieso, IFRS, 4/e, Solutions Manual (For Instructor Use Only)
, 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.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
3. Financial statements generally refer to the four basic financial statements: statement of financial
position, statement of comprehensive income (or 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.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
5. 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.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
6. 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 about providing resources to the entity.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
7. 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.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
8. Shareholders, creditors, suppliers, employees, and regulators all use general-purpose financial
statements. The primary user group is capital providers (shareholders and creditors).
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
9. 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 separate and distinct from their owners.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
Copyright © 2020 Wiley Kieso, IFRS,4/e, Solutions Manual (For Instructor Use Only) 1-3
,Questions Chapter 1 (Continued)
10. This statement is not correct. 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.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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, enforceable and global financial reporting standards (IFRSs) for general-
purpose financial statements.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
12. IOSCO (International Organization of Securities Commissions) is an association of organizations
that regulate the world’s securities markets. Members are generally the main financial regulators
for a given country. IOSCO does not set accounting standards.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
13. The mission of the IASB (International Accounting Standards Board) is to develop, in the public
interest, a single set of high quality, enforceable global international financial reporting standards
(IFRSs) for general-purpose financial statements.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
14. The purpose of the Monitoring Board is to establish a link between accounting standard-setters
and those public authorities (such as IOSCO) that generally oversee accounting standard-setters.
This board also provides political legitimacy to the overall organization.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
16. IASB International Financial Reporting Standards are financial accounting standards issued by the
IASB and are referred to as International Financial Reporting Standards (IFRS). The IFRS
Conceptual 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
Conceptual 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.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
17. In ranking from the most authoritative to least authoritative, International Financial Reporting
Standards are the most authoritative, followed by International Financial Reporting Standard
Interpretations and then the Conceptual Framework for Financial Reporting.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
1-4 Copyright © 2020 Wiley Kieso, IFRS, 4/e, Solutions Manual (For Instructor Use Only)
,Questions Chapter 1 (Continued)
18. The International Financial Reporting Standards 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.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
21. Economic consequences means the impact of accounting reports on the wealth positions of
issuers and users of financial information, and the decision-making behavior resulting from that
impact. In other words, accounting information impacts various users in many different ways which
leads to wealth transfers among these various groups.
If politics plays an important role in the development of accounting rules, the rules will be subject
to manipulation for the purpose of furthering whatever policy prevails at the moment. No matter
how well intentioned the rule-maker may be, if information is designed to indicate that investing in
a particular enterprise involves less risk than it actually does, or is designed to encourage
investment in a particular segment of the economy, financial reporting will suffer an irreplaceable
loss of credibility.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
22. No one particular proposal is expected in answer to this question. The students’ proposals,
however, should be defensible relative to the following criteria:
(1)The method must be efficient, responsive, and expeditious.
(2)The method must be free of bias and be above or insulated from pressure groups.
(3)The method must command widespread support if it does not have legislative authority.
(4)The method must produce sound yet practical accounting principles or standards.
The students’ proposals might take the form of alterations of the existing methodology, an accoun-
ting court (as proposed by Leonard Spacek), or governmental device.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
23. Concern exists about fraudulent financial reporting because it can undermine the entire financial
reporting process. Failure to provide information to users that is accurate can lead to inappropriate
allocations of resources in our economy. In addition, failure to detect massive fraud can lead to
additional governmental oversight of the accounting profession.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
Copyright © 2020 Wiley Kieso, IFRS,4/e, Solutions Manual (For Instructor Use Only) 1-5
,Questions Chapter 1 (Continued)
24. The “expectations gap” is the difference between what people think accountants should be doing
and what accountants think they can do. It is a difficult gap to close. The accounting profession
recognizes it must play an important role in narrowing this gap. To meet the needs of society, the
profession is continuing its efforts in developing accounting standards, such as numerous
pronouncements issued by the IASB, to serve as guidelines for recording and processing business
transactions in the changing economic environment.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
25. Accountants must perceive the moral dimensions of some situations because IFRS does not
define or cover all specific features that are to be reported in financial statements. In these
instances, accountants must choose among alternatives. These accounting choices influence
whether particular stakeholders may be harmed or benefited. Moral decision-making involves
awareness of potential harm or benefit and taking responsibility for the choices.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
1-6 Copyright © 2020 Wiley Kieso, IFRS, 4/e, Solutions Manual (For Instructor Use Only)
, TIME AND PURPOSE OF CONCEPTS FOR ANALYSIS
CA 1.1 (Time 5–10 minutes)
Purpose—to provide the student with an opportunity to answer questions about IFRS and standard-
setting.
CA 1.2 (Time 5–10 minutes)
Purpose—to provide the student with an opportunity to answer questions about IFRS and standard-
setting.
CA 1.3 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to answer questions about financial reporting and
standard-setting.
CA 1.4 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to distinguish between financial accounting and
managerial accounting, identify major financial statements, and differentiate financial statements and
financial reporting.
CA 1.5 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to evaluate the viewpoint of removing mandatory
accounting rules and allowing each company to voluntarily disclose the information it desired.
CA 1.6 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to identify the sponsoring organization of the IASB,
the method by which the IASB arrives at a decision, and the types and the purposes of documents
issued by the IASB.
CA 1.7 (Time 10–15 minutes)
Purpose—to provide the student with an opportunity to describe how reported accounting numbers
might affect an individual’s perceptions and actions.
CA 1.8 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to focus on the types of organizations involved in
the rule making process, what impact accounting has on the environment, and the environment’s
influence on accounting.
CA 1.9 (Time 10–15 minutes)
Purpose—to provide the student with an opportunity to focus on what type of rule-making environment
exists. In addition, this CA explores why user groups are interested in the nature of IFRS and why some
groups wish to issue their own rules.
CA 1.10 (Time 10–15 minutes)
Purpose—to provide the student with the opportunity to discuss the role of government officials in
accounting rule-making.
CA 1.11 (Time 20–25 minutes)
Purpose—to provide the student with an opportunity to consider the ethical dimensions of
implementation of a new accounting pronouncement.
CA 1.12 (Time 25–35 minutes)
Purpose—to provide the student with a writing assignment concerning the ethical issues related to
meeting earnings targets.
Copyright © 2020 Wiley Kieso, IFRS,4/e, Solutions Manual (For Instructor Use Only) 1-7
, SOLUTIONS TO CONCEPTS FOR ANALYSIS
CA 1.1
1. True.
2. False. Any company claiming compliance with IFRS must comply with all standards and
interpretations, including disclosure requirements.
3. False. The IFRS advisory council provides advice and counsel to the IASB on major policies and
technical issues. It is not a governmental body.
4. True.
5. False. The IASB has no government mandate and does follow a due process in issuing IFRS.
LO: 3, Bloom: K, Difficulty: Simple, Time: 5-10, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
CA 1.2
1. False. The objective emphasizes an entity perspective, not a stewardship approach.
2. False. The objective of 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, not preparing the financial statements.
3. False. International Accounting Standards were issued by the International Accounting Standards
Committee while International Financial Reporting Standards are issued by the IASB. Both have
authoritative support.
4. True.
LO: 2,3, Bloom: K, Difficulty: Simple, Time: 5-10, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
CA 1.3
1. c. 2. d. 3. c. 4. d. 5. b. 6. a. 7. a. 8. b. 9. d. 10. b.
LO: 2,3, Bloom: K, Difficulty: Simple, Time: 15-20, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
CA 1.4
(a) Financial accounting is the process that culminates in the preparation of financial reports relative
to the enterprise as a whole for use by parties both internal and external to the enterprise. In
contrast, managerial accounting is the process of identification, measurement, analysis, and
communication of financial information used by the management to plan, evaluate, and control
within an organization and to assure appropriate use of, and accountability for, its resources.
(b) The financial statements most frequently provided are the statement of financial position, the
statement of comprehensive income (or income statement), the statement of cash flows, and the
statement of changes in equity.
1-8 Copyright © 2020 Wiley Kieso, IFRS, 4/e, Solutions Manual (For Instructor Use Only)
