Solution Manual For
Intermediate Accounting IFRS 3rd Edition by Kieso
Chapter 1-14
Business ExamsPreparing for business exams involves mastering both conceptual understanding and practical application. Students are encouraged to study theories and frameworks but also to keep up-to-date with current
business trends. Case studies from leading businesses can be helpful, as they illustrate how business concepts are applied in real-world scenarios. Group discussions
CHAPTER 1
Financial Reporting and Accounting Standards
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
, ANSWERS TO QUESTIONS
Business ExamsPreparing for business exams involves mastering both conceptual understanding and practical application. Students are encouraged to
study theories and frameworks but also to keep up-to-date with current business trends. Case studies from leading businesses can be helpful, as they illustrate how business concepts are applied in real-world scenarios. Group discussions
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, 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
in 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
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 Organi- zation 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
Business ExamsPreparing for business exams involves mastering both conceptual understanding and practical application. Students are encouraged to study theories and frameworks but also to keep up-to-date with current business trends.
Case studies from leading businesses can be helpful, as they illustrate how business concepts are applied in real-world scenarios. Group discussions
12. IOSCO 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 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. International Financial Reporting Standards are the most authoritative, followed by International Financial
Reporting Standard Interpretations then the Conceptual Framework.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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
Business ExamsPreparing for business exams involves mastering both conceptual understanding and practical application. Students are encouraged to study theories and frameworks but also to keep up-to-date
with current business trends. Case studies from leading businesses can be helpful, as they illustrate how business concepts are applied in real-world scenarios. Group discussions
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 invest- ment 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
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
Intermediate Accounting IFRS 3rd Edition by Kieso
Chapter 1-14
Business ExamsPreparing for business exams involves mastering both conceptual understanding and practical application. Students are encouraged to study theories and frameworks but also to keep up-to-date with current
business trends. Case studies from leading businesses can be helpful, as they illustrate how business concepts are applied in real-world scenarios. Group discussions
CHAPTER 1
Financial Reporting and Accounting Standards
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
, ANSWERS TO QUESTIONS
Business ExamsPreparing for business exams involves mastering both conceptual understanding and practical application. Students are encouraged to
study theories and frameworks but also to keep up-to-date with current business trends. Case studies from leading businesses can be helpful, as they illustrate how business concepts are applied in real-world scenarios. Group discussions
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, 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
in 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
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 Organi- zation 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
Business ExamsPreparing for business exams involves mastering both conceptual understanding and practical application. Students are encouraged to study theories and frameworks but also to keep up-to-date with current business trends.
Case studies from leading businesses can be helpful, as they illustrate how business concepts are applied in real-world scenarios. Group discussions
12. IOSCO 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 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. International Financial Reporting Standards are the most authoritative, followed by International Financial
Reporting Standard Interpretations then the Conceptual Framework.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
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
Business ExamsPreparing for business exams involves mastering both conceptual understanding and practical application. Students are encouraged to study theories and frameworks but also to keep up-to-date
with current business trends. Case studies from leading businesses can be helpful, as they illustrate how business concepts are applied in real-world scenarios. Group discussions
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 invest- ment 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
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
