Accounting Quiz: Test MCQ!

1. Which of the following is not a way for a country to use IFRS?

All of the these are ways a country can use IFRS.

Require foreign companies listed on that country's stock exchange to use IFRS for consolidated financial statements.

Adopt IFRS as that country's national GAAP.

Allow foreign companies listed on that country's stock exchange to use IFRS .

Allow that country's companies listed on its stock exchange to use IFRS.

The given answer states that all of the options provided are ways for a country to use IFRS. This means that each option listed is a valid method for a country to adopt and implement IFRS. Therefore, there is no option that is not a way for a country to use IFRS, making the given answer correct.

Explanation

The given answer states that all of the options provided are ways for a country to use IFRS. This means that each option listed is a valid method for a country to adopt and implement IFRS. Therefore, there is no option that is not a way for a country to use IFRS, making the given answer correct.

2. Which of the following statements is false regarding providers of financing?

Disclosures are less extensive in those countries financed primarily by stock.

As companies become more dependent on financing by stock, more information is demanded.

In countries where capital stock is the primary source of financing, accounting emphasizes the income statement.

There is less pressure to provide accounting information in those countries in which financing is primarily by banks.

Bankers tend to focus more on solvency and stockholders focus more on profitability.

In countries where financing is primarily through stock, the statement that disclosures are less extensive is false. In fact, as companies rely more on stock financing, there is a greater demand for information, leading to more extensive disclosures.

Explanation

In countries where financing is primarily through stock, the statement that disclosures are less extensive is false. In fact, as companies rely more on stock financing, there is a greater demand for information, leading to more extensive disclosures.

3. Which of the following is not an IFRS pronouncement originally issued by the IASB?

First-Time Adoption of IFRS.

Operating Segments.

Financial Instruments: Disclosures.

Agriculture.

Business Combinations.

The correct answer is Agriculture. This is because the International Financial Reporting Standards (IFRS) do not have a specific pronouncement dedicated to agriculture. The IASB has issued pronouncements on topics such as first-time adoption of IFRS, operating segments, financial instruments disclosures, and business combinations, but not specifically on agriculture.

Explanation

The correct answer is Agriculture. This is because the International Financial Reporting Standards (IFRS) do not have a specific pronouncement dedicated to agriculture. The IASB has issued pronouncements on topics such as first-time adoption of IFRS, operating segments, financial instruments disclosures, and business combinations, but not specifically on agriculture.

4. Which of the following is not a factor influencing a country's financial reporting practices?

Inflation.

Providers of financing.

Legal system.

Political and economic ties.

Gross national product.

The correct answer is Gross national product. Gross national product is not a factor influencing a country's financial reporting practices. Factors such as inflation, providers of financing, legal system, and political and economic ties can all have an impact on a country's financial reporting practices. However, gross national product is a measure of the total value of goods and services produced by a country's residents, regardless of their location, and is not directly related to financial reporting practices.

Explanation

The correct answer is Gross national product. Gross national product is not a factor influencing a country's financial reporting practices. Factors such as inflation, providers of financing, legal system, and political and economic ties can all have an impact on a country's financial reporting practices. However, gross national product is a measure of the total value of goods and services produced by a country's residents, regardless of their location, and is not directly related to financial reporting practices.

5. Which of the following is not a problem caused by diverse accounting practices across countries?

Lack of comparability of financial statements between companies in the same country.

Preparation of consolidated financial statements.

Cost and expertise required of consolidations accounting staff.

Gaining access to foreign capital markets.

Need for a company to maintain multiple sets of accounting records.

Diverse accounting practices across countries can lead to a lack of comparability of financial statements between companies in different countries, making it difficult to analyze and compare their financial performance. However, this does not directly affect the comparability of financial statements between companies in the same country. Comparability issues arise when companies in the same country follow different accounting standards or practices. Therefore, lack of comparability of financial statements between companies in the same country is not a problem caused by diverse accounting practices across countries.

Explanation

Diverse accounting practices across countries can lead to a lack of comparability of financial statements between companies in different countries, making it difficult to analyze and compare their financial performance. However, this does not directly affect the comparability of financial statements between companies in the same country. Comparability issues arise when companies in the same country follow different accounting standards or practices. Therefore, lack of comparability of financial statements between companies in the same country is not a problem caused by diverse accounting practices across countries.

6. In the United States, foreign companies filing annual reports with the SEC that are not prepared in accordance with U.S. GAAP must:

Have a demonstrated need for capital to be used for operations in the U.S.

Use the U.S. dollar as their reporting currency.

Present financial statements that comply with international GAAP.

Use IFRS, or use foreign GAAP and provide a reconciliation to U.S. GAAP.

Conform with U.S. GAAP or present a reconciliation to U.S. GAAP.

Foreign companies filing annual reports with the SEC in the United States have the option to use either IFRS or foreign GAAP, but if they choose to use foreign GAAP, they must also provide a reconciliation to U.S. GAAP. This ensures that the financial statements of these foreign companies can be easily understood and compared to those prepared in accordance with U.S. GAAP. The requirement for a reconciliation helps to promote transparency and consistency in financial reporting.

Explanation

Foreign companies filing annual reports with the SEC in the United States have the option to use either IFRS or foreign GAAP, but if they choose to use foreign GAAP, they must also provide a reconciliation to U.S. GAAP. This ensures that the financial statements of these foreign companies can be easily understood and compared to those prepared in accordance with U.S. GAAP. The requirement for a reconciliation helps to promote transparency and consistency in financial reporting.

7. Which one of the following is not a background requirement for any IASB members?

Audit.

Academia.

Financial statement user.

Financial statement preparation.

Tax.

The correct answer is Tax. This is because being knowledgeable in tax regulations and laws is not a background requirement for any IASB member. The IASB (International Accounting Standards Board) is responsible for developing and issuing International Financial Reporting Standards (IFRS), which primarily focus on accounting and financial reporting standards. While a background in audit, academia, financial statement user, and financial statement preparation would be beneficial for an IASB member, tax expertise is not necessary for their role in setting global accounting standards.

Explanation

The correct answer is Tax. This is because being knowledgeable in tax regulations and laws is not a background requirement for any IASB member. The IASB (International Accounting Standards Board) is responsible for developing and issuing International Financial Reporting Standards (IFRS), which primarily focus on accounting and financial reporting standards. While a background in audit, academia, financial statement user, and financial statement preparation would be beneficial for an IASB member, tax expertise is not necessary for their role in setting global accounting standards.

8. Which of the following are not key FASB initiatives to further converge IFRS and U.S. GAAP?

Joint projects sharing FASB and IASB staff resources.

Monitoring ongoing IASB projects.

Short-term convergence projects.

Researching differences between U.S. GAAP and IFRS.

Having the IASB Chairman in-residence at the FASB office.

The correct answer is "Having the IASB Chairman in-residence at the FASB office." This option is not a key FASB initiative to further converge IFRS and U.S. GAAP. The other options, such as joint projects, monitoring ongoing projects, short-term convergence projects, and researching differences between U.S. GAAP and IFRS, are all key initiatives that aim to converge the two accounting frameworks.

Explanation

The correct answer is "Having the IASB Chairman in-residence at the FASB office." This option is not a key FASB initiative to further converge IFRS and U.S. GAAP. The other options, such as joint projects, monitoring ongoing projects, short-term convergence projects, and researching differences between U.S. GAAP and IFRS, are all key initiatives that aim to converge the two accounting frameworks.

9. Which of the following are not authoritative pronouncements of International Financial Reporting Standards (IFRSs)? (1) International Financial Reporting Standards issued by the IASB (2) International Accounting Standards issued by the IASC and adopted by the IASB (3) Interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) (4) U.S. Generally Accepted Accounting Principles

1, 3, and 4.

2, 3, and 4.

3 and 4.

4 only.

1, 2, 3, and 4.

The correct answer is 4 only because U.S. Generally Accepted Accounting Principles (GAAP) are not authoritative pronouncements of International Financial Reporting Standards (IFRSs). The other options (1, 2, and 3) are all authoritative pronouncements of IFRSs, including the International Financial Reporting Standards issued by the IASB, the International Accounting Standards issued by the IASC and adopted by the IASB, and the Interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC).

Explanation

The correct answer is 4 only because U.S. Generally Accepted Accounting Principles (GAAP) are not authoritative pronouncements of International Financial Reporting Standards (IFRSs). The other options (1, 2, and 3) are all authoritative pronouncements of IFRSs, including the International Financial Reporting Standards issued by the IASB, the International Accounting Standards issued by the IASC and adopted by the IASB, and the Interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC).

10. Which of the following is not true about IFRS?

IFRS is a comprehensive set of financial reporting standards.

IFRS are considered as generally accepted accounting principles.

IFRS is available to any organization or nation that wishes to use those standards.

IFRS includes only pronouncements issued by the IASB.

The IASB does not have the ability to enforce proper usage of IFRS.

This statement is not true about IFRS because IFRS includes pronouncements issued by both the IASB (International Accounting Standards Board) and the IFRS Interpretations Committee. Therefore, it is not accurate to say that IFRS includes only pronouncements issued by the IASB.

Explanation

This statement is not true about IFRS because IFRS includes pronouncements issued by both the IASB (International Accounting Standards Board) and the IFRS Interpretations Committee. Therefore, it is not accurate to say that IFRS includes only pronouncements issued by the IASB.