SOLUTION MANUAL FOR Intermediate Accounting IFRS 4th Edition by Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield Chapter 1 - 24 SOLUTION MANUAL FOR Intermediate Accounting IFRS 4th Edition by Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield Chapter 1-24 CHAPTER 1 Financial Reporting and Accounting Standards ASSIGNMENT CLASSIFICATION TABLE Topics Questions Concepts for Analysis 1. Global markets and financial reporting. 1, 2, 3, 4 4 2. Objective of financial reporting. 5, 6, 7, 8, 9, 10 2, 3 3. Standard -setting organizations. 11, 12, 13, 14, 15, 16, 17, 18 4. Financial reporting challenges. 19, 20, 21, 22, 23, 24, 25 ASSIGNMENT CHARACTERISTICS TABLE 1, 2, 3, 5, 6, 8, 9, 11 3, 7, 8, 10, 11, 12 Item Description Level of Difficulty Time (minutes) 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 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 (or income statement), statement of cash flows, and statement of changes in equity. Financial reporting is a bro ader 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 maki ng decisions 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: Simpl e, 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 develo p 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 12. IOSCO (International Organization of Securities Commissions) 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 (International Accounting Standards Board) 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. In ranking from the most authoritative to least authoritative, International Financial Reporting Standards are the most authoritative, followed by International Financial Reporting Standard Interpretations and then the Conceptual Framework for Financial Reporting. LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
