,Intermediate Accounting, 3e (Gordon/Raedy/Sannella)
Chapter 1 The Financial Reporting Environment
1.1 Overview Of Financial Reporting
1) The Financial Reporting Process Generates Three Basic Financial
Statements. Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
2) The Demand For Financial Information Is Based On Market Participant
Demand. Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
3) Managers Of Economic Entities Are Best Considered To Be Users Of Financial
Information. Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
4) Managers Of Economic Entities Are Best Considered To Be Preparers Of Financial
Information. Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
5) The Securities And Exchange Commission (SEC) Regulates Financial Reporting For Publicly
Traded Companies.
Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
6) The FASB Gives The SEC Authority To Regulate Accounting For Publicly Traded
Companies. Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
1
Copyright © 2022 Pearson Education, Inc.
,7) The Public Company Accounting Oversight Board (PCAOB) Sets Financial Accounting Standards
And Oversees The Audits Of Public Companies In The United States.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
8) Financial Accounting Standards Influence The Behavior Of Managers And Other Internal
Users. Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
9) Theories And Procedures That Evolve As A Result Of Lobbying From Various Groups Are
Examples Of Proactive Factors Within The Legal, Economic, Political, And Social Environment.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
10) Financial Information Includes Information That Is Not Governed By Rules Set Forth By The
Accounting Standard-Setting Bodies.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
11) What Is The Term That Describes The Process Of Identifying, Measuring, And Communicating
Financial Information About An Economic Entity To Various User Groups?
A) Financial Reporting
B) Accounting Standard Setting
C) Financial Statement
D) Financial
Accounting Answer:
D
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
2
Copyright © 2022 Pearson Education, Inc.
,12) Which Element Of Financial Accounting Involves Identifying The Individuals Who Demand
Financial Information?
A) Financial Information
B) Economic Entity
C) User Groups
D) Legal, Economic, Political, And Social
Environment Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
13) Which Of The Following Is Not One Of The Four Basic Financial Statements?
A) Balance Sheet
B) Trial Balance
C) Cash Flows Statement
D) Statement Of Comprehensive
Income Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
14) Which Organization Is Responsible For Promulgating U.S. GAAP?
A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) International Accounting Standards Board
D) Securities And Exchange
Commission Answer: A
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
15) Which Organization Is Responsible For Setting Auditing Standards And Overseeing The Audits Of
Public Companies In The United States?
A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) American Institute Of Certified Public Accountants
D) Securities And Exchange
Commission Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
3
Copyright © 2022 Pearson Education, Inc.
,16) Which Organization Prepares And Grades The Uniform CPA Examination?
A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) American Institute Of Certified Public Accountants
D) International Accounting Standards Board
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
17) Which Of The Following User Groups Consists Of Individuals That Provide Guidance To Others In
Making Investment And Credit Decisions?
A) Financial Analysts
B) Equity Investors
C) Creditors
D) Suppliers
Answer: A
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
18) Which Of The Following User Groups Consists Of Individuals Who Expect To Receive A Return
On Their Investment?
A) Employees
B) Equity Investors
C) Creditors
D) Suppliers And
Customers Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
19) Which Of The Following User Groups Consist Of Companies That Analyze Financial Information To
Identify The Reporting Entity's Objectives, Assumptions, Overall Business Strategy, And Capabilities?
A) Competitors
B) Creditors And Other Debt Investors
C) Employees And Labor Unions
D) Suppliers And
Customers Answer: A
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
4
Copyright © 2022 Pearson Education, Inc.
,20) Which Party Involved In The Financial Reporting Process Provides Assurance That The
Financial Statements Prepared By Management Fairly Present The Financial Position And
Performance Of The Company?
A) Standard Setters
B) Regulators
C) Internal Auditors
D) External
Auditors Answer:
D
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
21) Which Regulatory Body Sets Auditing Standards And Oversees The Audits Of Public Companies
In The United States?
A) Public Company Accounting Oversight Board (PCAOB)
B) Financial Accounting Standards Board (FASB)
C) American Institute Of Certified Public Accountants (AICPA)
D) Securities And Exchange Commission
(SEC) Answer: A
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
22) Which Of The Following Types Of Information Would Be Categorized As Financial Information?
A) Asset Values Governed By Accounting Standards
B) Footnote Disclosures In Annual Reports
C) Auditor's Report
D) All Of The
Above Answer:
D
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
23) Equity Investors Include All But Which Of The Following?
A) Partners
B) Shareholders
C) Bondholders
D) Sole
Proprietor
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
5
Copyright © 2022 Pearson Education, Inc.
,24) What Group Or Organization Both Protects Investors And Oversees The Accounting Standard-
Setting Process In The United States?
A) Public Accounting Firms
B) American Institute Of Public Accountants
C) United States Securities And Exchange Commission
D) Financial Accounting Standards Board
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
25) Is The Process Of Analyzing Large Data Sets In Order To Draw Useful Conclusions.
A) Technology Innovation
B) Financial Reporting
C) Data Analytics
D) Data Capture
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
26) How Does Accounting Help In The Capital Allocation Process?
Answer: Financial Accounting Provides Information That Enables Users To Evaluate Economic
Entities And Make Efficient Resource Allocation Decisions Based On The Risks And Returns Of A
Particular Investment. This Process Directs Capital Flows To Their Most Productive Uses. The Notion
Of "Efficient And Effective" Allocation Of Capital Helps Drive Capitalist Economies And Societies To
Greater Standards Of Living. To Provide Unreliable And Irrelevant Information Leads To Poor Capital
Allocation Which Adversely Affects The Securities Market. An Inefficient And Wasteful Allocation
Would Reward Poorly Run Entities Until They Ultimately Flounder Or Go Bust.
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Reflective Thinking
27) In What Ways Does Accounting Information Proactively Interact With Its Environment?
Answer: Financial Accounting Is Proactive In That It Can Change Or Influence Its Environment By
Providing Feedback Information That Is Used By Organizations And Individuals To Reshape The
Economy. Accounting Information Is Used To Efficiently Allocate Capital Resources Throughout The
Economy.
Accounting Standards Can Also Influence Managerial Behavior.
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Reflective Thinking
6
Copyright © 2022 Pearson Education, Inc.
,28) What Is Meant By General-Purpose Financial Statements?
Answer: Published Financial Statements Are Called General-Purpose Financial Statements Because They
Provide Information To A Wide Spectrum Of User Groups: Investors, Creditors, Financial Analysts,
Customers, Employees, Competitors, Suppliers, Unions, And Government Agencies. Although
Considered General Purpose, Most Financial Information Is Provided To Satisfy Users With Limited
Ability Or Authority To Obtain Additional Information, Which Includes Investors And Creditors.
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Reflective Thinking
29) Define Data Analytics And Explain How It Can Be Used In Financial Reporting.
Answer: Data Analytics Is The Process Of Analyzing Large Data Sets To Draw Useful Conclusions. It
Involves Converting Raw Data Into Useful Knowledge. Data Analytics Is Playing An Increasingly
Important Role In The Accounting Profession. In Financial Reporting, We Can Use Data Analytics To
Improve The Quality Of Our Estimates And Valuations. Auditors Are Using It To Increase The Quality
And Accuracy Of The Audit.
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Reflective Thinking
1.2 Role Of Standard Setters
1) IFRS Refers To Generally Accepted Accounting Standards That Apply
Globally. Answer: TRUE
Diff: 1
Objective: 1.2
IFRS/GAAP: IFRS
AACSB: Application Of Knowledge
2) Standard Setters Develop Accounting Standards Based On Natural Economic
Laws. Answer: FALSE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
3) The FASB And The IFRS Have Been Working Together To Converge U.S. And International Standards
To And Have Eliminated Most Differences.
Answer: FALSE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
7
Copyright © 2022 Pearson Education, Inc.
,4) The FASB Promulgates Accounting Standards In The U.S. And The International Accounting
Standards Board (IASB) Issues International Accounting Standards.
Answer: TRUE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
5) Accountants In The United States Do Not Need To Learn International Accounting
Standards. Answer: FALSE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
6) The SEC Permits The Use Of IFRS-Based Financial Statements By International Companies With
Shares Trading On U.S. Stock Exchanges.
Answer: TRUE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
7) When Accountants Work On The Financial Statements Of U.S. Companies With Foreign
Subsidiaries Prepared Under IFRS In The Home Countries, The Accountants Do Not Convert The
Subsidiaries' Financial Statements To U.S. GAAP.
Answer: FALSE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
8) The American Institute Of Certified Public Accountants Tests IFRS On The Uniform CPA
Exam. Answer: TRUE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
8
Copyright © 2022 Pearson Education, Inc.
, 9) Which Of The Following Statements Correctly Identifies Accounting Standard Setters?
A) The AICPA Promulgates Accounting Standards In The U.S. And The IFRS Issues
International Accounting Standards.
B) The AICPA Promulgates Accounting Standards In The U.S. And The IASB Issues
International Accounting Standards.
C) The FASB Promulgates Accounting Standards In The U.S. And The IFRS Issues International
Accounting Standards.
D) The FASB Promulgates Accounting Standards In The U.S. And The IASB Issues International
Accounting Standards.
Answer: D
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
10) Which Of The Following Statements Is False?
A) The SEC Permits The Use Of IFRS-Based Financial Statements By International Companies With
Shares Trading On U.S. Stock Exchanges.
B) Non-U.S. Companies Operate In The United States But Prepare Their Financial Statements Using IFRS.
C) Accountants Must Convert To U.S. GAAP The IFRS Financial Statements Of Foreign Subsidiaries
That Belong To U.S. Companies.
D) The Accounting Profession Has Determined That A Working Knowledge Of IFRS Is Not
Important For Accountants Working In The United States.
Answer: D
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
11) Which Of The Following Is Not A Reason Why An Accountant In The United States Should
Learn International Accounting Standards?
A) The United States Has Plans To Fully Adopt IFRS In The Near Future.
B) The SEC Permits The Use Of IFRS-Based Financial Statements By International Companies With
Shares Trading On The U.S. Stock Exchanges.
C) An Accountant May Work For, Or Assist, A Foreign Company That Operates In The U.S. And Uses
IFRS For Financial Reporting.
D) U.S. Companies Operate Subsidiaries Outside Of The United States Which Report Under IFRS In Their
Home Countries.
Answer: A
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
9
Copyright © 2022 Pearson Education, Inc.
Chapter 1 The Financial Reporting Environment
1.1 Overview Of Financial Reporting
1) The Financial Reporting Process Generates Three Basic Financial
Statements. Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
2) The Demand For Financial Information Is Based On Market Participant
Demand. Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
3) Managers Of Economic Entities Are Best Considered To Be Users Of Financial
Information. Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
4) Managers Of Economic Entities Are Best Considered To Be Preparers Of Financial
Information. Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
5) The Securities And Exchange Commission (SEC) Regulates Financial Reporting For Publicly
Traded Companies.
Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
6) The FASB Gives The SEC Authority To Regulate Accounting For Publicly Traded
Companies. Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
1
Copyright © 2022 Pearson Education, Inc.
,7) The Public Company Accounting Oversight Board (PCAOB) Sets Financial Accounting Standards
And Oversees The Audits Of Public Companies In The United States.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
8) Financial Accounting Standards Influence The Behavior Of Managers And Other Internal
Users. Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
9) Theories And Procedures That Evolve As A Result Of Lobbying From Various Groups Are
Examples Of Proactive Factors Within The Legal, Economic, Political, And Social Environment.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
10) Financial Information Includes Information That Is Not Governed By Rules Set Forth By The
Accounting Standard-Setting Bodies.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
11) What Is The Term That Describes The Process Of Identifying, Measuring, And Communicating
Financial Information About An Economic Entity To Various User Groups?
A) Financial Reporting
B) Accounting Standard Setting
C) Financial Statement
D) Financial
Accounting Answer:
D
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
2
Copyright © 2022 Pearson Education, Inc.
,12) Which Element Of Financial Accounting Involves Identifying The Individuals Who Demand
Financial Information?
A) Financial Information
B) Economic Entity
C) User Groups
D) Legal, Economic, Political, And Social
Environment Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
13) Which Of The Following Is Not One Of The Four Basic Financial Statements?
A) Balance Sheet
B) Trial Balance
C) Cash Flows Statement
D) Statement Of Comprehensive
Income Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
14) Which Organization Is Responsible For Promulgating U.S. GAAP?
A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) International Accounting Standards Board
D) Securities And Exchange
Commission Answer: A
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
15) Which Organization Is Responsible For Setting Auditing Standards And Overseeing The Audits Of
Public Companies In The United States?
A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) American Institute Of Certified Public Accountants
D) Securities And Exchange
Commission Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
3
Copyright © 2022 Pearson Education, Inc.
,16) Which Organization Prepares And Grades The Uniform CPA Examination?
A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) American Institute Of Certified Public Accountants
D) International Accounting Standards Board
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
17) Which Of The Following User Groups Consists Of Individuals That Provide Guidance To Others In
Making Investment And Credit Decisions?
A) Financial Analysts
B) Equity Investors
C) Creditors
D) Suppliers
Answer: A
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
18) Which Of The Following User Groups Consists Of Individuals Who Expect To Receive A Return
On Their Investment?
A) Employees
B) Equity Investors
C) Creditors
D) Suppliers And
Customers Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
19) Which Of The Following User Groups Consist Of Companies That Analyze Financial Information To
Identify The Reporting Entity's Objectives, Assumptions, Overall Business Strategy, And Capabilities?
A) Competitors
B) Creditors And Other Debt Investors
C) Employees And Labor Unions
D) Suppliers And
Customers Answer: A
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
4
Copyright © 2022 Pearson Education, Inc.
,20) Which Party Involved In The Financial Reporting Process Provides Assurance That The
Financial Statements Prepared By Management Fairly Present The Financial Position And
Performance Of The Company?
A) Standard Setters
B) Regulators
C) Internal Auditors
D) External
Auditors Answer:
D
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
21) Which Regulatory Body Sets Auditing Standards And Oversees The Audits Of Public Companies
In The United States?
A) Public Company Accounting Oversight Board (PCAOB)
B) Financial Accounting Standards Board (FASB)
C) American Institute Of Certified Public Accountants (AICPA)
D) Securities And Exchange Commission
(SEC) Answer: A
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
22) Which Of The Following Types Of Information Would Be Categorized As Financial Information?
A) Asset Values Governed By Accounting Standards
B) Footnote Disclosures In Annual Reports
C) Auditor's Report
D) All Of The
Above Answer:
D
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
23) Equity Investors Include All But Which Of The Following?
A) Partners
B) Shareholders
C) Bondholders
D) Sole
Proprietor
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
5
Copyright © 2022 Pearson Education, Inc.
,24) What Group Or Organization Both Protects Investors And Oversees The Accounting Standard-
Setting Process In The United States?
A) Public Accounting Firms
B) American Institute Of Public Accountants
C) United States Securities And Exchange Commission
D) Financial Accounting Standards Board
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
25) Is The Process Of Analyzing Large Data Sets In Order To Draw Useful Conclusions.
A) Technology Innovation
B) Financial Reporting
C) Data Analytics
D) Data Capture
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application Of Knowledge
26) How Does Accounting Help In The Capital Allocation Process?
Answer: Financial Accounting Provides Information That Enables Users To Evaluate Economic
Entities And Make Efficient Resource Allocation Decisions Based On The Risks And Returns Of A
Particular Investment. This Process Directs Capital Flows To Their Most Productive Uses. The Notion
Of "Efficient And Effective" Allocation Of Capital Helps Drive Capitalist Economies And Societies To
Greater Standards Of Living. To Provide Unreliable And Irrelevant Information Leads To Poor Capital
Allocation Which Adversely Affects The Securities Market. An Inefficient And Wasteful Allocation
Would Reward Poorly Run Entities Until They Ultimately Flounder Or Go Bust.
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Reflective Thinking
27) In What Ways Does Accounting Information Proactively Interact With Its Environment?
Answer: Financial Accounting Is Proactive In That It Can Change Or Influence Its Environment By
Providing Feedback Information That Is Used By Organizations And Individuals To Reshape The
Economy. Accounting Information Is Used To Efficiently Allocate Capital Resources Throughout The
Economy.
Accounting Standards Can Also Influence Managerial Behavior.
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Reflective Thinking
6
Copyright © 2022 Pearson Education, Inc.
,28) What Is Meant By General-Purpose Financial Statements?
Answer: Published Financial Statements Are Called General-Purpose Financial Statements Because They
Provide Information To A Wide Spectrum Of User Groups: Investors, Creditors, Financial Analysts,
Customers, Employees, Competitors, Suppliers, Unions, And Government Agencies. Although
Considered General Purpose, Most Financial Information Is Provided To Satisfy Users With Limited
Ability Or Authority To Obtain Additional Information, Which Includes Investors And Creditors.
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Reflective Thinking
29) Define Data Analytics And Explain How It Can Be Used In Financial Reporting.
Answer: Data Analytics Is The Process Of Analyzing Large Data Sets To Draw Useful Conclusions. It
Involves Converting Raw Data Into Useful Knowledge. Data Analytics Is Playing An Increasingly
Important Role In The Accounting Profession. In Financial Reporting, We Can Use Data Analytics To
Improve The Quality Of Our Estimates And Valuations. Auditors Are Using It To Increase The Quality
And Accuracy Of The Audit.
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Reflective Thinking
1.2 Role Of Standard Setters
1) IFRS Refers To Generally Accepted Accounting Standards That Apply
Globally. Answer: TRUE
Diff: 1
Objective: 1.2
IFRS/GAAP: IFRS
AACSB: Application Of Knowledge
2) Standard Setters Develop Accounting Standards Based On Natural Economic
Laws. Answer: FALSE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
3) The FASB And The IFRS Have Been Working Together To Converge U.S. And International Standards
To And Have Eliminated Most Differences.
Answer: FALSE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
7
Copyright © 2022 Pearson Education, Inc.
,4) The FASB Promulgates Accounting Standards In The U.S. And The International Accounting
Standards Board (IASB) Issues International Accounting Standards.
Answer: TRUE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
5) Accountants In The United States Do Not Need To Learn International Accounting
Standards. Answer: FALSE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
6) The SEC Permits The Use Of IFRS-Based Financial Statements By International Companies With
Shares Trading On U.S. Stock Exchanges.
Answer: TRUE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
7) When Accountants Work On The Financial Statements Of U.S. Companies With Foreign
Subsidiaries Prepared Under IFRS In The Home Countries, The Accountants Do Not Convert The
Subsidiaries' Financial Statements To U.S. GAAP.
Answer: FALSE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
8) The American Institute Of Certified Public Accountants Tests IFRS On The Uniform CPA
Exam. Answer: TRUE
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
8
Copyright © 2022 Pearson Education, Inc.
, 9) Which Of The Following Statements Correctly Identifies Accounting Standard Setters?
A) The AICPA Promulgates Accounting Standards In The U.S. And The IFRS Issues
International Accounting Standards.
B) The AICPA Promulgates Accounting Standards In The U.S. And The IASB Issues
International Accounting Standards.
C) The FASB Promulgates Accounting Standards In The U.S. And The IFRS Issues International
Accounting Standards.
D) The FASB Promulgates Accounting Standards In The U.S. And The IASB Issues International
Accounting Standards.
Answer: D
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
10) Which Of The Following Statements Is False?
A) The SEC Permits The Use Of IFRS-Based Financial Statements By International Companies With
Shares Trading On U.S. Stock Exchanges.
B) Non-U.S. Companies Operate In The United States But Prepare Their Financial Statements Using IFRS.
C) Accountants Must Convert To U.S. GAAP The IFRS Financial Statements Of Foreign Subsidiaries
That Belong To U.S. Companies.
D) The Accounting Profession Has Determined That A Working Knowledge Of IFRS Is Not
Important For Accountants Working In The United States.
Answer: D
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
11) Which Of The Following Is Not A Reason Why An Accountant In The United States Should
Learn International Accounting Standards?
A) The United States Has Plans To Fully Adopt IFRS In The Near Future.
B) The SEC Permits The Use Of IFRS-Based Financial Statements By International Companies With
Shares Trading On The U.S. Stock Exchanges.
C) An Accountant May Work For, Or Assist, A Foreign Company That Operates In The U.S. And Uses
IFRS For Financial Reporting.
D) U.S. Companies Operate Subsidiaries Outside Of The United States Which Report Under IFRS In Their
Home Countries.
Answer: A
Diff: 1
Objective: 1.2
IFRS/GAAP: GAAP/IFRS
AACSB: Application Of Knowledge
9
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