FSA LEVEL 1 EXAM QUESTIONS WITH
CORRECT ANSWERS
Financial Accounting Standards Board (FASB) creation - Correct Answers -1973
1975-2015 Intangible Assets - Correct Answers -17-84%
Relation between Sustainability criteria and corporate financial performance - Correct
Answers -90% non-negative
Amount of institutional investors using sustainability information in decisions - Correct
Answers -82% - 2014 PwC
PRI 2017 - Correct Answers -2500 signatories, $60 trillion
SASB Scope (amount of standards) - Correct Answers -79 industries across 11 sectors
SASB Standards designed to - Correct Answers -1. Focus on the U.S. capital markets;
2. Surface sustainability information likely to be material; 3. Yield decision-useful data;
4. Be cost-effective for corporate issuers;
5. Identify industry-specific disclosure topics
SICS - Correct Answers -Sustainable Industry Classification System
SICS use methodology focused on which impacts (4) - Correct Answers -Business
Model
Resource Intensity
Sustainability Impacts
Sustainability Innovation Potential
PCAOB (Public Company Accounting Oversight Board) - Correct Answers -The PCAOB
protects investors and the public interest by working toward useful independent audit
reports and by establishing standards for audits and auditors. The PCAOB has
oversight over the external audit profession. The SEC regularly communicates with and
provides feedback to the PCAOB, the FASB, the International Accounting Standards
Board ("IASB"), and the American Institute of Certified Public Accountants ("AICPA")
regarding accounting standards
Trueblood Committee - Correct Answers -to propose the objectives of financial
reporting, based on the underlying belief that identifying objectives would help improve
financial reporting. The Trueblood Committee's report seconded the decision-usefulness
, objective that ASOBAT had articulated, with a strong emphasis on future cash flows to
investors. The Trueblood Committee stated that the economic and social goals of
business are equally important. 44 The committee pointed to pollution as an example of
"enterprise activities which require sacrifices from those who do not benefit."45 In other
words, some corporate activities impose externalities on the rest of society. Therefore,
one objective of financial statements is "to report on those activities of the report
affecting society which can be determined and described and measured and which are
important to the role of the enterprise in its social environment."46
Wheat Committee - Correct Answers -charged with identifying ways to improve the
establishment of accounting standards. In 1972, it proposed the formation of the
Financial Accounting Standards Board ("FASB"). The FASB was to be an independent
organization dedicated to the development of financial accounting standards, unlike the
APB, which was made up of individuals serving part-time. The AICPA adopted the
Wheat Committee's recommendation, and in July 1973, the FASB began operations
and replaced the APB with the SEC's approva
Characteristics of Useful Financial Information - Correct Answers -• Relevance, which
explicitly recognizes the importance of materiality
• Faithful representation, which more specifically means that the information is
complete, neutral, and free from error. To enhance the relevance and faithful
representation of the information, it should also be:
• Comparable;
• Verifiable;
• Timely;
• Understandable
Determining if a trend has a material affect - Correct Answers -(1) Is the known trend,
demand, commitment, event, or uncertainty likely to come to fruition? If management
determines that it is not reasonably likely to occur, no disclosure is required. (2) If
management cannot make that determination, it must evaluate objectively the
consequences of the known trend, demand, commitment, event, or uncertainty, on the
assumption that it will come to fruition. Disclosure is then required unless management
determines that a material effect on the registrant's financial condition or results of
operations is not reasonably likely to occur
SEC Climate Change Guidance - Correct Answers -1. Impact of legislation and
regulation
2. International Accords
3. Indirect Consequences of regulation or business trends
4. Physical Impacts of Climate Change
How many companies report sustainability - Correct Answers -95% of 250 largest firms
Disclosure Overload - Correct Answers -The idea that companies have been disclosing
too much information in sustainability reports and in a way that is not useful
CORRECT ANSWERS
Financial Accounting Standards Board (FASB) creation - Correct Answers -1973
1975-2015 Intangible Assets - Correct Answers -17-84%
Relation between Sustainability criteria and corporate financial performance - Correct
Answers -90% non-negative
Amount of institutional investors using sustainability information in decisions - Correct
Answers -82% - 2014 PwC
PRI 2017 - Correct Answers -2500 signatories, $60 trillion
SASB Scope (amount of standards) - Correct Answers -79 industries across 11 sectors
SASB Standards designed to - Correct Answers -1. Focus on the U.S. capital markets;
2. Surface sustainability information likely to be material; 3. Yield decision-useful data;
4. Be cost-effective for corporate issuers;
5. Identify industry-specific disclosure topics
SICS - Correct Answers -Sustainable Industry Classification System
SICS use methodology focused on which impacts (4) - Correct Answers -Business
Model
Resource Intensity
Sustainability Impacts
Sustainability Innovation Potential
PCAOB (Public Company Accounting Oversight Board) - Correct Answers -The PCAOB
protects investors and the public interest by working toward useful independent audit
reports and by establishing standards for audits and auditors. The PCAOB has
oversight over the external audit profession. The SEC regularly communicates with and
provides feedback to the PCAOB, the FASB, the International Accounting Standards
Board ("IASB"), and the American Institute of Certified Public Accountants ("AICPA")
regarding accounting standards
Trueblood Committee - Correct Answers -to propose the objectives of financial
reporting, based on the underlying belief that identifying objectives would help improve
financial reporting. The Trueblood Committee's report seconded the decision-usefulness
, objective that ASOBAT had articulated, with a strong emphasis on future cash flows to
investors. The Trueblood Committee stated that the economic and social goals of
business are equally important. 44 The committee pointed to pollution as an example of
"enterprise activities which require sacrifices from those who do not benefit."45 In other
words, some corporate activities impose externalities on the rest of society. Therefore,
one objective of financial statements is "to report on those activities of the report
affecting society which can be determined and described and measured and which are
important to the role of the enterprise in its social environment."46
Wheat Committee - Correct Answers -charged with identifying ways to improve the
establishment of accounting standards. In 1972, it proposed the formation of the
Financial Accounting Standards Board ("FASB"). The FASB was to be an independent
organization dedicated to the development of financial accounting standards, unlike the
APB, which was made up of individuals serving part-time. The AICPA adopted the
Wheat Committee's recommendation, and in July 1973, the FASB began operations
and replaced the APB with the SEC's approva
Characteristics of Useful Financial Information - Correct Answers -• Relevance, which
explicitly recognizes the importance of materiality
• Faithful representation, which more specifically means that the information is
complete, neutral, and free from error. To enhance the relevance and faithful
representation of the information, it should also be:
• Comparable;
• Verifiable;
• Timely;
• Understandable
Determining if a trend has a material affect - Correct Answers -(1) Is the known trend,
demand, commitment, event, or uncertainty likely to come to fruition? If management
determines that it is not reasonably likely to occur, no disclosure is required. (2) If
management cannot make that determination, it must evaluate objectively the
consequences of the known trend, demand, commitment, event, or uncertainty, on the
assumption that it will come to fruition. Disclosure is then required unless management
determines that a material effect on the registrant's financial condition or results of
operations is not reasonably likely to occur
SEC Climate Change Guidance - Correct Answers -1. Impact of legislation and
regulation
2. International Accords
3. Indirect Consequences of regulation or business trends
4. Physical Impacts of Climate Change
How many companies report sustainability - Correct Answers -95% of 250 largest firms
Disclosure Overload - Correct Answers -The idea that companies have been disclosing
too much information in sustainability reports and in a way that is not useful
