CPA EXAM (BECKER F1) QUESTIONS AND ANSWERS
Who has the legal authority to establish U.S. GAAP? - Answers- The SEC
The SEC was established by the _________________. - Answers- Securities
Exchange Act of 1934
How many board members does the FASB have? How long can they serve on the
board? - Answers- The FASB has seven full-time members who serve for five-year
terms and may be reappointed to one additional five-year term.
What is the Committee on Accounting Procedures (CAP)? - Answers- The CAP was a
part-time committee of the AICPA that promulgated Accounting Research Bulletins
(ARBs), which determined GAAP from 1939 - 1959.
What is the Accounting Principles Board? - Answers- The APB was a part-time
committee of the AICPA that issued opinions (APBOs) and interpretations (APBIs),
which determine GAAP from 1959 - 1973.
What is the FASB? - Answers- The FASB is an independent full-time organization that
was established in 1973 and has determine GAAP since then.
T or F: If it's not in the FASB Accounting Standards Codification, it's not GAAP. -
Answers- T
The codification is comprised of the following literature (hint: FEDPRIA): - Answers- 1.
Financial Accounting Standards Board (FASB)
2. Emerging Issues Task Force (EITF) Abstracts and Topic D
3. Derivative Implementation Group Issues
4. Accounting Principles Board Opinions
5. Accounting Research Bulletins
6. Accounting Interpretations
7. American Institute of Certified Public Accountants (AICPA)
What SEC Standards are included in the Codification (hint: Regulation For Accounting I-
S Emerging)? - Answers- 1. Regulation S-X
2. Financial Reporting Releases (FRR)
3. Accounting Series Releases (ASR)
4. Interpretive Releases (IR)
5. Staff Accounting Bulletins (SAB)
6. EITF Topic D and SEC Staff Observer Comments
,What is the goal of the Private Company Council? - Answers- To establish alternatives
to U.S. GAAP, where appropriate, and to make private company financial statements
more relevant, less complex, and cost-beneficial.
Who created the Private Company Council? - Answers- The Financial Accounting
Foundation (FAF)
T or F: The FASB updates the Accounting Standards Codification for new U.S. GAAP
issued by the FASB and for amendments to the SEC content with Accounting Standards
Updates. These Accounting Standards Updates are authoritative literature. - Answers-
F: Accounting Standards Updates are NOT authoritative literature. They provide
background information, update the code, and describe the basis for conclusions on
changes in the code.
What does the term International Financial Reporting Standards encompass? -
Answers- International Financial Reporting Standards, International Accounting
Standards, and Interpretations developed by the IFRIC and the former SIC.
The IASB is developing the Conceptual Framework for Financial Reporting, which does
what? - Answers- The Conceptual Framework for Financial Reporting describes the
basic concepts that underlie the preparation and presentation of financial statements for
EXTERNAL USERS.
What was the goal of the international convergence of accounting standards between
the IASB and the FASB? - Answers- The goal was a single set of high-quality,
international accounting standards that companies could use for both domestic and
cross-border financial reporting.
An IFRS must be approved by at least __________ members of the ___________. -
Answers- 9, IASB
T or F: Both the IFRS Conceptual Framework and U.S. GAAP Conceptual Framework
can and should be applied to specific accounting issues. - Answers- F: Under IFRS,
entities should consider applicability of the Framework. Under U.S. GAAP, the
Framework CANNOT be applied to specific accounting issues.
The Conceptual Frameworks Underlying Financial Accounting are also known as
____________. - Answers- basic reasoning
Who created the conceptual framework underlying financial accounting in the U.S.? -
Answers- The FASB
What is the purpose of the conceptual framework created by the FASB? - Answers- It
serves as a BASIS FOR ALL FASB PRONOUNCEMENTS.
, The conceptual framework created by the FASB is set forth in pronouncements called
_______________. - Answers- Statements of Financial Accounting Concepts (SFAC)
Are SFAC GAAP? - Answers- No, but they provide a basis for GAAP.
What is the objective of general purpose financial reporting? - Answers- The purpose of
general purpose financial reporting is to provide financial information about the reporting
entity that is USEFUL to the PRIMARY USERS in MAKING DECISIONS about providing
resources to the reporting entity.
In other words, the purpose is to disclose the entity's performance.
The International Accounting Standards Board (IASB) was established in ___________
as part of the ______________. - Answers- 2001, International Financial Reporting
Standards (IFRS) Foundation
What is the purpose of the IASB? - Answers- To develop a single set of high-quality,
GLOBAL accounting standards.
In addition to the IASB, the IFRS Foundation sponsors the ______________. -
Answers- International Financial Reporting Interpretations Committee (IFRIC).
What does the IFRIC do? - Answers- The IFRIC provides guidance on newly identified
financial reporting issues not addressed in the IFRSs and assists the IASB in achieving
international convergence of accounting standards.
Who are the primary users of general purpose financial reports? - Answers- The
primary users of general purpose financial reports are external. They are existing and
potential investors, lenders, and other creditors.
Financial information provided in general purpose financial reports is designed to
___________. - Answers- meet "informational needs"
What are the fundamental qualitative characteristics of useful financial information? -
Answers- 1. Relevance
2. Faithful representation
What does it mean for financial information to be relevant? - Answers- Financial
information is relevant if it is capable of making a difference in the decisions made by
users.
To be relevant, financial information must have _____________ and/or
______________, and must be ______________. - Answers- predictive value,
confirming value, material
Who has the legal authority to establish U.S. GAAP? - Answers- The SEC
The SEC was established by the _________________. - Answers- Securities
Exchange Act of 1934
How many board members does the FASB have? How long can they serve on the
board? - Answers- The FASB has seven full-time members who serve for five-year
terms and may be reappointed to one additional five-year term.
What is the Committee on Accounting Procedures (CAP)? - Answers- The CAP was a
part-time committee of the AICPA that promulgated Accounting Research Bulletins
(ARBs), which determined GAAP from 1939 - 1959.
What is the Accounting Principles Board? - Answers- The APB was a part-time
committee of the AICPA that issued opinions (APBOs) and interpretations (APBIs),
which determine GAAP from 1959 - 1973.
What is the FASB? - Answers- The FASB is an independent full-time organization that
was established in 1973 and has determine GAAP since then.
T or F: If it's not in the FASB Accounting Standards Codification, it's not GAAP. -
Answers- T
The codification is comprised of the following literature (hint: FEDPRIA): - Answers- 1.
Financial Accounting Standards Board (FASB)
2. Emerging Issues Task Force (EITF) Abstracts and Topic D
3. Derivative Implementation Group Issues
4. Accounting Principles Board Opinions
5. Accounting Research Bulletins
6. Accounting Interpretations
7. American Institute of Certified Public Accountants (AICPA)
What SEC Standards are included in the Codification (hint: Regulation For Accounting I-
S Emerging)? - Answers- 1. Regulation S-X
2. Financial Reporting Releases (FRR)
3. Accounting Series Releases (ASR)
4. Interpretive Releases (IR)
5. Staff Accounting Bulletins (SAB)
6. EITF Topic D and SEC Staff Observer Comments
,What is the goal of the Private Company Council? - Answers- To establish alternatives
to U.S. GAAP, where appropriate, and to make private company financial statements
more relevant, less complex, and cost-beneficial.
Who created the Private Company Council? - Answers- The Financial Accounting
Foundation (FAF)
T or F: The FASB updates the Accounting Standards Codification for new U.S. GAAP
issued by the FASB and for amendments to the SEC content with Accounting Standards
Updates. These Accounting Standards Updates are authoritative literature. - Answers-
F: Accounting Standards Updates are NOT authoritative literature. They provide
background information, update the code, and describe the basis for conclusions on
changes in the code.
What does the term International Financial Reporting Standards encompass? -
Answers- International Financial Reporting Standards, International Accounting
Standards, and Interpretations developed by the IFRIC and the former SIC.
The IASB is developing the Conceptual Framework for Financial Reporting, which does
what? - Answers- The Conceptual Framework for Financial Reporting describes the
basic concepts that underlie the preparation and presentation of financial statements for
EXTERNAL USERS.
What was the goal of the international convergence of accounting standards between
the IASB and the FASB? - Answers- The goal was a single set of high-quality,
international accounting standards that companies could use for both domestic and
cross-border financial reporting.
An IFRS must be approved by at least __________ members of the ___________. -
Answers- 9, IASB
T or F: Both the IFRS Conceptual Framework and U.S. GAAP Conceptual Framework
can and should be applied to specific accounting issues. - Answers- F: Under IFRS,
entities should consider applicability of the Framework. Under U.S. GAAP, the
Framework CANNOT be applied to specific accounting issues.
The Conceptual Frameworks Underlying Financial Accounting are also known as
____________. - Answers- basic reasoning
Who created the conceptual framework underlying financial accounting in the U.S.? -
Answers- The FASB
What is the purpose of the conceptual framework created by the FASB? - Answers- It
serves as a BASIS FOR ALL FASB PRONOUNCEMENTS.
, The conceptual framework created by the FASB is set forth in pronouncements called
_______________. - Answers- Statements of Financial Accounting Concepts (SFAC)
Are SFAC GAAP? - Answers- No, but they provide a basis for GAAP.
What is the objective of general purpose financial reporting? - Answers- The purpose of
general purpose financial reporting is to provide financial information about the reporting
entity that is USEFUL to the PRIMARY USERS in MAKING DECISIONS about providing
resources to the reporting entity.
In other words, the purpose is to disclose the entity's performance.
The International Accounting Standards Board (IASB) was established in ___________
as part of the ______________. - Answers- 2001, International Financial Reporting
Standards (IFRS) Foundation
What is the purpose of the IASB? - Answers- To develop a single set of high-quality,
GLOBAL accounting standards.
In addition to the IASB, the IFRS Foundation sponsors the ______________. -
Answers- International Financial Reporting Interpretations Committee (IFRIC).
What does the IFRIC do? - Answers- The IFRIC provides guidance on newly identified
financial reporting issues not addressed in the IFRSs and assists the IASB in achieving
international convergence of accounting standards.
Who are the primary users of general purpose financial reports? - Answers- The
primary users of general purpose financial reports are external. They are existing and
potential investors, lenders, and other creditors.
Financial information provided in general purpose financial reports is designed to
___________. - Answers- meet "informational needs"
What are the fundamental qualitative characteristics of useful financial information? -
Answers- 1. Relevance
2. Faithful representation
What does it mean for financial information to be relevant? - Answers- Financial
information is relevant if it is capable of making a difference in the decisions made by
users.
To be relevant, financial information must have _____________ and/or
______________, and must be ______________. - Answers- predictive value,
confirming value, material
