11/18/23, 11:08 PM intermediate accounting ifrs 3rd edition test bank ch2
CHAPTER 2
CONCEPTUAL FRAMEWORK FOR FINANCIAL
REPORTING
CHAPTER LEARNING OBJECTIVES
1. Describe the usefulness of a conceptual framework and the objective of financial reporting.
2. Identify the qualitative characteristics of accounting information and the basic elements of
financial statements.
3. Review the basic assumptions of accounting.
4. Explain the application of the basic principles of accounting.
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,11/18/23, 11:08 PM intermediate accounting ifrs 3rd edition test bank ch2
2-2 Test Bank for Intermediate Accounting: IFRS Edition, 3e
TRUE-FALSE—Conceptual
1. The conceptual framework for accounting has been discovered through empirical research.
2. A conceptual framework is a coherent system of concepts that flow from an objective.
3. The International Accounting Standards Board (IASB) uses a conceptual framework based
on individual concepts developed by each member of the standard-setting body.
4. A soundly developed conceptual framework enables the International Accounting Standards
Board (IASB) to issue more useful and consistent pronouncements over time.
5. A soundly developed conceptual framework enables the International Accounting Standards
Board (IASB) to quickly solve new and emerging practical problems by referencing basic
theory.
6. The IASB has issued a conceptual framework and has agreed to develop a common
conceptual framework with the FASB.
7. The International Accounting Standards Board’s (IASB’s) Conceptual Framework includes
supplementary information.
8. The International Accounting Standards Board’s (IASB’s) Conceptual Framework includes
the elements of financial statements.
9. The 2nd level of the IASB’s conceptual framework provides the qualitative characteristics
that make accounting information useful and the elements of financial statements.
10. One of the challenges in developing a common conceptual framework will be to agree on
how the framework should be organized since the FASB and IASB conceptual frameworks
are organized in very different ways.
11. The first level of the conceptual framework identifies the recognition and measurement
concepts used in establishing accounting standards.
12. Decision usefulness is the underlying theme of the conceptual framework.
13. Users of financial statements are assumed to have no knowledge of business and financial
accounting matters by financial statement preparers.
14. The foundation of the International Accounting Standards Board’s (IASB’s) Conceptual
Framework is found on the third level of the Framework and includes assumptions,
principles, and constraints.
15. An implicit assumption of the International Accounting Standards Board’s (IASB’s)
Conceptual Framework is that users need to be experts in business and financial
accounting matters to understand the information contained in financial statements.
16. Relevance and faithful representation are the two fundamental qualities that make
accounting information useful for decision making.
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, 11/18/23, 11:08 PM intermediate accounting ifrs 3rd edition test bank ch2
Conceptual Framework for Financial Reporting 2-3
17. The idea of consistency does not mean that companies cannot switch from one accounting
method to another.
18. Timeliness and neutrality are two ingredients of relevance.
19. Verifiability and predictive value are two ingredients of faithful representation.
20. The second level of the International Accounting Standards Board’s (IASB’s) Conceptual
Framework serves as a bridge between the “why” of accounting and the “how” of
accounting.
21. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework,
qualitative characteristics are considered either relevant or prudent.
22. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework,
qualitative characteristics distinguish better information from inferior information for
decision-making purposes.
23. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework, an
enhancing qualitative characteristic is predictive value.
24. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework, an
ingredient of a fundamental qualitative characteristic is understandability.
25. To be a faithful representation as described by the International Accounting Standards
Board’s (IASB’s) Conceptual Framework, information must be confirmatory.
26. An enhancing quality as described by the International Accounting Standards Board’s
(IASB’s) Conceptual Framework is comparability.
27. Moon, Inc. applies different accounting treatments to similar events from period to period.
Moon, Inc. is violating verifiability as described by the International Accounting Standards
Board’s (IASB’s) Conceptual Framework.
28. The International Accounting Standards Board’s (IASB) definition of retained earnings is
“the residual interest in the assets of the entity after deducting all its liabilities.”
29. The historical cost principle would be of limited usefulness if not for the going concern
assumption.
30. The economic entity assumption means that economic activity can be identified with a
particular legal entity.
31. Materiality is one of the basic assumptions of accounting used by the International
Accounting Standards Board (IASB).
32. Periodicity is one of the basic assumptions of accounting used by the International
Accounting Standards Board (IASB).
33. Timeliness is one of the basic assumptions of accounting used by the International
Accounting Standards Board (IASB).
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CHAPTER 2
CONCEPTUAL FRAMEWORK FOR FINANCIAL
REPORTING
CHAPTER LEARNING OBJECTIVES
1. Describe the usefulness of a conceptual framework and the objective of financial reporting.
2. Identify the qualitative characteristics of accounting information and the basic elements of
financial statements.
3. Review the basic assumptions of accounting.
4. Explain the application of the basic principles of accounting.
about:blank 1/27
,11/18/23, 11:08 PM intermediate accounting ifrs 3rd edition test bank ch2
2-2 Test Bank for Intermediate Accounting: IFRS Edition, 3e
TRUE-FALSE—Conceptual
1. The conceptual framework for accounting has been discovered through empirical research.
2. A conceptual framework is a coherent system of concepts that flow from an objective.
3. The International Accounting Standards Board (IASB) uses a conceptual framework based
on individual concepts developed by each member of the standard-setting body.
4. A soundly developed conceptual framework enables the International Accounting Standards
Board (IASB) to issue more useful and consistent pronouncements over time.
5. A soundly developed conceptual framework enables the International Accounting Standards
Board (IASB) to quickly solve new and emerging practical problems by referencing basic
theory.
6. The IASB has issued a conceptual framework and has agreed to develop a common
conceptual framework with the FASB.
7. The International Accounting Standards Board’s (IASB’s) Conceptual Framework includes
supplementary information.
8. The International Accounting Standards Board’s (IASB’s) Conceptual Framework includes
the elements of financial statements.
9. The 2nd level of the IASB’s conceptual framework provides the qualitative characteristics
that make accounting information useful and the elements of financial statements.
10. One of the challenges in developing a common conceptual framework will be to agree on
how the framework should be organized since the FASB and IASB conceptual frameworks
are organized in very different ways.
11. The first level of the conceptual framework identifies the recognition and measurement
concepts used in establishing accounting standards.
12. Decision usefulness is the underlying theme of the conceptual framework.
13. Users of financial statements are assumed to have no knowledge of business and financial
accounting matters by financial statement preparers.
14. The foundation of the International Accounting Standards Board’s (IASB’s) Conceptual
Framework is found on the third level of the Framework and includes assumptions,
principles, and constraints.
15. An implicit assumption of the International Accounting Standards Board’s (IASB’s)
Conceptual Framework is that users need to be experts in business and financial
accounting matters to understand the information contained in financial statements.
16. Relevance and faithful representation are the two fundamental qualities that make
accounting information useful for decision making.
about:blank 2/27
, 11/18/23, 11:08 PM intermediate accounting ifrs 3rd edition test bank ch2
Conceptual Framework for Financial Reporting 2-3
17. The idea of consistency does not mean that companies cannot switch from one accounting
method to another.
18. Timeliness and neutrality are two ingredients of relevance.
19. Verifiability and predictive value are two ingredients of faithful representation.
20. The second level of the International Accounting Standards Board’s (IASB’s) Conceptual
Framework serves as a bridge between the “why” of accounting and the “how” of
accounting.
21. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework,
qualitative characteristics are considered either relevant or prudent.
22. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework,
qualitative characteristics distinguish better information from inferior information for
decision-making purposes.
23. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework, an
enhancing qualitative characteristic is predictive value.
24. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework, an
ingredient of a fundamental qualitative characteristic is understandability.
25. To be a faithful representation as described by the International Accounting Standards
Board’s (IASB’s) Conceptual Framework, information must be confirmatory.
26. An enhancing quality as described by the International Accounting Standards Board’s
(IASB’s) Conceptual Framework is comparability.
27. Moon, Inc. applies different accounting treatments to similar events from period to period.
Moon, Inc. is violating verifiability as described by the International Accounting Standards
Board’s (IASB’s) Conceptual Framework.
28. The International Accounting Standards Board’s (IASB) definition of retained earnings is
“the residual interest in the assets of the entity after deducting all its liabilities.”
29. The historical cost principle would be of limited usefulness if not for the going concern
assumption.
30. The economic entity assumption means that economic activity can be identified with a
particular legal entity.
31. Materiality is one of the basic assumptions of accounting used by the International
Accounting Standards Board (IASB).
32. Periodicity is one of the basic assumptions of accounting used by the International
Accounting Standards Board (IASB).
33. Timeliness is one of the basic assumptions of accounting used by the International
Accounting Standards Board (IASB).
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