Conceptual Framework Quiz: Exam
- 1.The purpose of the Conceptual Framework is:
- A.
To assist the International Accounting Standards Board to develop IFRS Standards
- B.
To assist preparers of IFRS financial statements to develop consistent accounting policies when no IFRS Standard applies to a particular transaction or other event, or when a Standard allows a choice of accounting policy
- C.
To assist all parties to understand and interpret IFRS Standards
- D.
All of the above
- 2.The Conceptual Framework can override requirements in a Standard.
- A.
True
- B.
False
- 3.Revision of the Conceptual Framework will automatically lead to changes in Standards that are inconsistent with the revised concepts.
- A.
True
- B.
False
- 4.When developing requirements for IFRS Standards, can the International Accounting Standards Board depart from the Conceptual Framework?
- A.
No
- B.
Yes, the Board is not required to use the Conceptual Framework when developing Standards
- C.
Yes, but only from aspects of the Conceptual Framework and only if doing so is needed to meet the objective of financial reporting
- 5.If an IFRS Standard sets out requirements that are inconsistent with the Conceptual Framework, preparers have to apply the Conceptual Framework for affected transactions.
- A.
True
- B.
False
- 6.Entities have to apply the revised Conceptual Framework:
- A.
Immediately after it is issued
- B.
For annual reporting periods beginning on or after 1 January 2020, with early application permitted
- C.
Never - the Conceptual Framework is only used by the International Accounting Standards Board
- 7.The objective of general purpose financial reporting as described in the Conceptual Framework is to:
- A.
Provide information to regulators
- B.
Support the entity's tax return
- C.
Meet the information needs of an entity's stakeholders
- D.
Provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity
- 8.Which of the following does the Conceptual Framework identify as the primary users of general purpose financial reports?
- A.
Employees, investors and trade union representatives
- B.
Existing and potential investors, lenders and other creditors
- C.
Lenders and other creditors and customers
- D.
Existing and potential investors, government agencies and the general public
- 9.Information needed to assess management's stewardship is always different from information needed to assess the prospects for future net cash inflows to the entity.
- A.
True
- B.
False
- 10.Financial reports need to provide information useful in making decisions relating to providing resources to the entity. Those decisions include decisions about exercising rights to vote on, or otherwise influence, management’s actions that affect the use of the entity’s economic resources.
- A.
True
- B.
False
- 11.How does the Conceptual Framework explain the role of stewardship?
- A.
Providing information needed to assess management's stewardship is identified as an additional objective of financial reporting, equal in prominence to providing financial information useful to users in making decisions relating to providing resources to the entity
- B.
Decisions relating to providing resources to the entity depend on users' assessment of the amount, timing and uncertainty of the prospects for future net cash inflows to the entity and on their assessment of management's stewardship
- C.
Providing information needed to assess stewardship is more important than providing information needed to assess the prospects for future cash inflows to the entity
- D.
Financial reports are not intended to provide information needed to assess stewardship
- 12.The fundamental qualitative characteristics of useful financial information are:
- A.
Comparability and relevance
- B.
Relevance and reliability
- C.
Relevance, reliability and comparability
- D.
Relevance and faithful representation
- E.
Comparability, relevance and faithful representation
- 13.For information to be relevant, it has to possess:
- A.
Only predictive value
- B.
Only confirmative value
- C.
Both predictive and confirmatory value
- D.
Either predictive or confirmatory value, or both
- 14.The Conceptual Framework describes prudence as:
- A.
The exercise of caution when making judgements under conditions of uncertainty
- B.
A bias towards understating assets or income and towards overstating liabilities or expenses
- C.
A preference towards the earlier recognition of expenses and liabilities than of income and assets
- D.
A mechanism for smoothing profits over time (understate profits in good years and overstate profits in bad years)
- E.
A form of accounting conservatism
- 15.Which statement is included in the Conceptual Framework?
- A.
Relevance is a fundamental qualitative characteristic of useful financial information
- B.
Financial information without both relevance and faithful representation is not useful
- C.
Enhancing qualitative characteristics cannot make information useful if that information is irrelevant or does not provide a faithful representation of what it purports to represent
- D.
All of the above
- E.
None of the above
- 16.A trade-off between the fundamental qualitative characteristics of relevance and faithful representation may need to be made in order to meet the objective of financial reporting.
- A.
True
- B.
False
- 17.Only a legal entity can be a reporting entity.
- A.
True
- B.
False
- 18.Consolidated financial statements provide information about the assets, liabilities, equity, income and expenses of both the parent and its subsidiaries as:
- A.
Separate reporting entities
- B.
A partnership
- C.
A single reporting entity
- D.
A legal entity
- 19.When a reporting entity is not a legal entity and does not comprise only legal entities all linked by a parent-subsidiary relationship, the boundary of the reporting entity can contain an incomplete set of economic activities if that entity provides a description of how the boundary was determined.
- A.
True
- B.
False
- 20.What drives the determination of the boundary of a reporting entity that is not a legal entity and does not comprise only legal entities all linked by a parent-subsidiary relationship?
- A.
Management's choice
- B.
Legal form of the reporting entity
- C.
Information needs of the primary users of the reporting entity
- D.
All of the above
- E.
None of the above
- 21.A reporting entity can be:
- A.
A portion of an entity
- B.
A single entity
- C.
More than one entity
- D.
All of the above
- E.
None of the above
- 22.The Conceptual Framework defines an asset as:
- A.
A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
- B.
A present economic resource controlled by the entity as a result of past events
- C.
A right to receive income or reduce expenses in the future
- D.
None of the above
- 23.If an entity has a legal ownership of a physical object, its asset is:
- A.
The set of rights arising from legal ownership of the physical object
- B.
The physical object
- C.
The economic benefits that may flow from the physical object
- D.
All of the above
- E.
None of the above
- 24.For a right to meet the definition of an asset, it needs to be likely that the right will produce economic benefits for the entity.
- A.
True
- B.
False
- 25.The Conceptual Framework defines a liability as:
- A.
A present obligation of the entity to transfer an economic resource as a result of past events
- B.
A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodyiong economic benefits
- C.
An amount the entity may have to pay after the end of the reporting period
- D.
None of the above
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