Test Bank for Intermediate Accounting, Volume 1 7th Canadian Edition by Thomas H. Beechy,

Chap 01_7ce

Student: ___________________________________________________________________________

1. The main purpose of financial accounting is to communicate useful financial information to decision-makers
both inside and outside of the business organization.
True False



2. The Canadian Business Corporations Act mandates that all incorporated companies in Canada follow
IFRS.
True False



3. Private companies in Canada may choose between IFRS or ASPE.
True False



4. Canada has adapted its own pre-existing standards for public companies to IFRS, while the U.S has adopted
IFRS completely.
True False



5. A disclosed basis of accounting is acceptable if a company's financial statements are prepared solely for
internal use.
True False



6. Only publicly traded companies in Canada are required to adopt IFRS.
True False



7. Earnings quality is said to be high when most of a company's earnings are the result of its continuing
operations.
True False



8. Income tax deferral is illegal in Canada.
True False

,9. In Canada, income for tax and accounting purposes may be different.
True False



10. External users of a company's financial statements may have conflicting objectives.
True False



11. In Canada, IFRS standards were essentially converged with Canadian GAAP.
True False



12. A company's functional currency is always the currency in which the financial statements are presented.
True False



13. It is acceptable for publicly traded Canadian companies to report under US GAAP.
True False



14. In Canada, almost all equity financing for both public and private companies is done through private
placements.
True False



15. IFRS standards may be modified to allow for a disclosed basis of accounting (DBA).
True False



16. Privately held, publicly accountable companies with a fiduciary responsibility must comply with IFRS.
True False



17. Mutual fund companies, which may be privately held, are deemed to have a fiduciary responsibility and
must therefore comply with IFRS.
True False



18. Canadian companies must always present their financial results in Canadian dollars.
True False

,19. Canadian corporations are prohibited from using U.S. GAAP.
True False



20. A company's functional currency is the currency in which it conducts most of its business.
True False



21. The disclosed basis of accounting (DBA) refers to the use of Non-GAAP accounting policies by private
companies.
True False



22. A wholly-owned subsidiary of a multinational corporation is essentially a private corporation.
True False



23. The accounting standards for private enterprises (ASPE) are essentially a scaled-down version of the CPA
Handbook, which is available to all small and medium sized enterprises with no fiduciary responsibility.
True False



24. Different stakeholders have different reporting requirements with respect to general-purpose financial
statements. A lender will be more interested in a company's cash flows while an investor will likely be more
interested in a company's earnings.
True False



25. The influence of tax rules when selecting appropriate accounting treatment for a transaction is particularly
strong with public companies.
True False



26. Due to the excellent work of the ACSB, there are very few choices among alternative accounting policies
today.
True False



27. Cash flow prediction is a common internal user reporting objective.
True False

, 28. Disclosure notes facilitate the evaluation of enterprise position and performance because they include
information, which helps to explain qualitative aspects of earnings.
True False



29. A company whose net income is highly correlated to its operating cash flows is said to have a high quality
of earnings.
True False



30. Lending institutions such as banks are most interested in a company's profitability ratios.
True False



31. Developments in accounting standards have not addressed the problem of using accounting techniques to
smooth earnings.
True False



32. The Federal Accounting Standards Board (FASB) is a branch of the CPA Order.
True False



33. The CPA Canada Handbook is the most important primary source of GAAP.
True False



34. The various provincial securities commissions do not exert influence on the development of accounting
standards.
True False



35. FASB and International Accounting Standards are secondary sources of GAAP.
True False



36. The CPA Canada Handbook requires that income for tax purposes be equal to a company's accounting
income at all times.
True False