CHAPTER 01 – TEST BANK 10 CE
1) In which of the following situations would professional judgment NOT be required in
decision making?
A) Recognition of revenue.
B) The making of accounting estimates.
C) Disclosure of information in the notes to the financial statements.
D) Use of IFRS or ASPE for publicly traded companies in Canada.
2) Which of the following statements pertaining to generally accepted accounting principles
(GAAP) is INCORRECT?
A) The process of developing GAAP is political.
B) If a proposal for a new financial reporting is not accepted by users, it is unlikely to
become part of GAAP.
C) If an entity that follows GAAP encounters transactions that are not addressed by the
CPA Canada Handbook, it is permitted to adopt accounting practices that are consistent with
industry practice.
D) Publicly traded companies are required to submit financial statements that comply
with GAAP to the securities commissions under which they are registered.
3) Which of the following examples does NOT demonstrate the interrelationships of
financial statement elements?
A) A sale on account will increase assets and equity.
B) Depreciation of equipment will decrease assets and decrease equity.
C) The payment of a payable will decrease liabilities and increase assets.
D) The contribution of capital will increase an asset and increase equity.
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, 4) Which of the following statements pertaining to GAAP for publicly accountable
enterprises (PAEs) is correct?
A) PAEs include not-for-profit organizations.
B) Commencing in 2011, most Canadian PAEs are required to elect to report under either
IFRS or ASPE on a prospective basis.
C) PAEs include an entity, that as one of its primary businesses, holds assets in a
fiduciary capacity for a broad group of outsiders.
D) CPA Canada and the Financial Accounting Standards Board (FASB) harmonized the
accounting standards of the United States and Canada for PAEs beginning in 1998.
5) Which of the following statements pertaining to private enterprises (PEs) is
INCORRECT?
A) PEs may adopt either ASPE or IFRS but once a set of standards is adopted, the PEs
are not permitted to apply some standards from ASPE and others from IFRS.
B) The accounting standards for a PE are included in a separate part of the CPA Canada
Handbook.
C) PEs with annual revenues over $10,000,000, are required to report under IFRS.
D) A PE is a profit-oriented enterprise that has none of its issued and outstanding
financial instruments traded in a public market and does not hold assets in a fiduciary capacity
for a broad group of outsiders as one of its primary businesses.
6) Which of the following organizations are required to use only the IFRS (Part I) in
Canada?
A) All corporations, government agencies and private companies.
B) Public companies and private companies whose shareholders' equity is in excess of
$500,000,000 at any particular year-end.
C) Public companies, private companies and not-for-profit organizations.
D) Government business enterprises.
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1) In which of the following situations would professional judgment NOT be required in
decision making?
A) Recognition of revenue.
B) The making of accounting estimates.
C) Disclosure of information in the notes to the financial statements.
D) Use of IFRS or ASPE for publicly traded companies in Canada.
2) Which of the following statements pertaining to generally accepted accounting principles
(GAAP) is INCORRECT?
A) The process of developing GAAP is political.
B) If a proposal for a new financial reporting is not accepted by users, it is unlikely to
become part of GAAP.
C) If an entity that follows GAAP encounters transactions that are not addressed by the
CPA Canada Handbook, it is permitted to adopt accounting practices that are consistent with
industry practice.
D) Publicly traded companies are required to submit financial statements that comply
with GAAP to the securities commissions under which they are registered.
3) Which of the following examples does NOT demonstrate the interrelationships of
financial statement elements?
A) A sale on account will increase assets and equity.
B) Depreciation of equipment will decrease assets and decrease equity.
C) The payment of a payable will decrease liabilities and increase assets.
D) The contribution of capital will increase an asset and increase equity.
Version 1 1
, 4) Which of the following statements pertaining to GAAP for publicly accountable
enterprises (PAEs) is correct?
A) PAEs include not-for-profit organizations.
B) Commencing in 2011, most Canadian PAEs are required to elect to report under either
IFRS or ASPE on a prospective basis.
C) PAEs include an entity, that as one of its primary businesses, holds assets in a
fiduciary capacity for a broad group of outsiders.
D) CPA Canada and the Financial Accounting Standards Board (FASB) harmonized the
accounting standards of the United States and Canada for PAEs beginning in 1998.
5) Which of the following statements pertaining to private enterprises (PEs) is
INCORRECT?
A) PEs may adopt either ASPE or IFRS but once a set of standards is adopted, the PEs
are not permitted to apply some standards from ASPE and others from IFRS.
B) The accounting standards for a PE are included in a separate part of the CPA Canada
Handbook.
C) PEs with annual revenues over $10,000,000, are required to report under IFRS.
D) A PE is a profit-oriented enterprise that has none of its issued and outstanding
financial instruments traded in a public market and does not hold assets in a fiduciary capacity
for a broad group of outsiders as one of its primary businesses.
6) Which of the following organizations are required to use only the IFRS (Part I) in
Canada?
A) All corporations, government agencies and private companies.
B) Public companies and private companies whose shareholders' equity is in excess of
$500,000,000 at any particular year-end.
C) Public companies, private companies and not-for-profit organizations.
D) Government business enterprises.
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