102 test bank for intermediate accounting 15th edition

102 Test Bank for Intermediate Accounting 15th Edition
True False Questions - Free Text Questions - Multiple Choice
Questions

True False Questions
Financial reports in the early 21st century did not provide any
information about a company’s soft assets (intangibles).
1.

True

2.

False

GAAP is a product of careful logic or empirical findings and is
not influenced by political action.
1.

True

2.

False

Financial accounting is the process of identifying, measuring,
analyzing, and communicating financial information
needed by management to plan, evaluate, and control a
company’s operations.
1.

True

2.

False

The International Accounting Standards Board has seven
members.
1.

True

2.

False

The standard-setting structure used by the International
Accounting Standards Board is very similar to that used
by the Financial Accounting Standards Board.
1.

True

2.

False

Ethical issues in financial accounting are governed by the
AICPA.

1.

True

2.

False

International Financial Reporting Standards preceded
International Accounting Standards
1.

True

2.

False

The expectations gap is due to the difference between what the
public thinks accountants should do and what
accountants think they can do.
1.

True

2.

False

Accounting standards are now less likely to require the
recording or disclosure of fair value information.
1.

True

2.

False

The AICPA’s Code of Professional Conduct requires that
members prepare financial statements in accordance with
generally accepted accounting principles.
1.

True

2.

False

The rules-based standards of IFRS are more detailed than the
simpler, principles-based standards of U.S. GAAP.
1.

True

2.

False

IFRS includes both International Financial Reporting Standards
and International Accounting Standards.
1.

True

2.

False


The Public Company Accounting Oversight Board has oversight
and enforcement authority and establishes auditing and
independence standards and rules.
1.

True

2.

False

The AICPA created the Accounting Principles Board in 1959.
1.

True

2.

False

The FASB’s Codification creates a new set of GAAP.
1.

True

2.

False

U.S. companies that list overseas are required to use
International Financial Reporting Standards, issued by the
International Accounting Standards Board.
1.

True

2.

False

The passage of a new FASB Accounting Standards Update
requires the support of five of the seven board members.
1.

True

2.

False

Statements of Financial Accounting Concepts set forth
fundamental objectives and concepts that are used by the
FASB in developing future standards of financial
accounting and reporting.
1.

True

2.

False

The Securities and Exchange Commission appointed the
Committee on Accounting Procedure.
1.

True


2.

False

Financial statements are the principal means through which a
company communicates its financial information to those
outside it.
1.

True

2.

False

Users of financial reports of a company use the information
provided by these reports to make their capital allocation
decisions.
1.

True

2.

False

An effective process of capital allocation promotes productivity
and provides an efficient market for buying and selling
securities and obtaining and granting credit.
1.

True

2.

False

Users of financial accounting statements have both coinciding
and conflicting needs for information of various types.

1.

True

2.

False

The internal control standards applicable to Sarbanes–Oxley
(SOX) apply only to large public companies listed on U.S.
exchanges.
1.

True

2.

False

The objective of financial reporting is to report the plans made
by a company to improve the productivity of its
employees.
1.

True

2.

False

Investors are interested in financial reporting because it
provides information that is useful for making decisions.
1.

True

2.

False


Multiple Choice Questions - Page 1
Characteristics of generally accepted accounting principles
include all of the following except
1.

a.authoritative accounting that the rule-making body has established as a principle of
reporting.

2.

b.standards are considered useful by the profession.

3.

c.each principle is approved by the SEC.

4.

d.practice has become universally accepted over time.

Accrual accounting is used because
1.

a.cash flows are considered less important.

2.

b.it provides a better indication of a company’s ability to generate cash flows than the
cash basis.

3.

c.it recognizes revenues when cash is received and expenses when cash is paid.

4.

d.None of the answer choices are correct.

What is the purpose of Emerging Issues Task Force?
1.

a.Provide interpretation of existing standards.

2.

b.Provide a consensus on how to account for new and unusual financial transactions.

3.

c.Provide interpretive guidance.

4.

d.Provide timely guidance on select issues.

Which of the following represents a form of communication
through financial reporting but not through financial
statements?
1.

a.Balance sheet.

2.

b.President's letter.

3.

c.Income statement.

4.

d.Notes to financial statements.

The financial statements most frequently provided include all of
the following except the
1.

a.balance sheet.


2.

b.income statement.

3.

c.statement of cash flows.

4.

d.statement of retained earnings.

Which of the following helps in determining whether a business
thrives?
1.

a.Markets.

2.

b.Free enterprise.

3.

c.Competition.

4.

d.All of these answer choices are correct.

The passage of a new FASB Accounting Standards Update
requires the support of
1.

a.seven Board members.

2.

b.three Board members.

3.

c.four Board members.

4.

d.five Board members.

Which organization was responsible for issuing Accounting
Research Bulletins?
1.

a.The Accounting Principles Board.

2.

b.The Committee on Accounting Procedure.

3.

c.The SEC.

4.

d.The FASB.

What is due process in the context of standard setting at the
FASB?
1.

a.The FASB operates in full view of the public.

2.

b.Public hearings are held on proposed accounting standards.

3.

c.Interested parties can make their views known.

4.

d.All of the answer choices are correct.


The process of identifying, measuring, analyzing, and
communicating financial information needed by

management to plan, evaluate, and control an
organization’s operations is called
1.

a.financial accounting.

2.

b.managerial accounting.

3.

c.tax accounting.

4.

d.auditing.

Which organization is responsible for issuing Emerging Issues
Task Force Statements?
1.

a.The FASB

2.

b.The CAP

3.

c.The APB

4.

d.The SEC

A characteristic of generally accepted accounting principles
include:
1.

a.a common set of standards and principles.

2.

b.standards and principles are based a federal statutes.

3.

c.acceptance requires an affirmative vote of Certified Public Accountants.

4.

d.practices that become accepted for at least a year by all industry members.

What is the relationship between the Securities and Exchange
Commission and accounting standard setting in the
United States?
1.

a.The SEC requires all companies listed on an exchange to submit their financial

statements to the SEC.

2.

b.The SEC coordinates with the AICPA in establishing accounting standards.

3.

c.The SEC has a mandate to establish accounting standards for enterprises under its
jurisdiction.

4.

d.The SEC reviews financial statements for compliance.


Primary users for general-purpose financial statements include
1.

a.creditors.

2.

b.employees.

3.

c.investors.

4.

d.both creditors and investors.

The Financial Accounting Standards Board (FASB) was
proposed by the
1.

a.American Institute of Certified Public Accountants.

2.

b.Accounting Principles Board.

3.

c.Study Group on the Objectives of Financial Statements.

4.

d.Study Group on establishment of Accounting Principles (Wheat Committee).

What is the objective of financial reporting?
1.

a.Provide information that is useful to management in making decisions.

2.

b.Provide information that clearly portrays nonfinancial transactions.

3.

c.Provide information about the reporting entity that is useful to present and potential
equity investors, lenders, and other creditors.

4.

d.Provide information that excludes claims to the resources.

Which of the following is related to an effective capital
allocation?
1.

a.Promoting productivity.

2.

b.Encouraging innovation.

3.

c.Providing an efficient market for buying and selling securities.

4.

d.All of these answer choices are correct.

Financial statements in the early 2000s provide information
related to
1.

a.nonfinancial measurements.

2.

b.forward-looking data.

3.

c.hard assets (inventory and plant assets).

4.

d.None of these answer choices are correct.


The information provided by financial reporting pertains to
1.

a.individual business enterprises, rather than to industries or an economy as a whole
or to members of society as consumers.

2.

b.business industries, rather than to individual enterprises or an economy as a whole
or to members of society as consumers.

3.

c.individual business enterprises, industries, and an economy as a whole, rather than

to members of society as consumers.

4.

d.an economy as a whole and to members of society as consumers, rather than to
individual enterprises or industries.

Which perspective is adopted as a part of the objective of
general-purpose financial reporting?
1.

a.A decision-usefulness perspective.

2.

b.A proprietary perspective.

3.

c.An entity perspective.

4.

d.A financial reporting perspective.

Companies that are listed on a stock exchange are required to
submit their financial statements to the
1.

a.AICPA.

2.

b.APB

3.

c.FASB.

4.

d.SEC.

Which of the following organizations has been responsible for
setting U.S. accounting standards?
1.

a.The Accounting Principles Board.

2.

b.The Committee on Accounting Procedure.

3.

c.The Financial Accounting Standards Board.

4.

d.All of the answer choices are correct.

Which of the following is not a user of financial reports?
1.

a.Creditors.


2.

b.Government agencies.

3.

c.Unions.

4.

d.All of these are users.

Which of the following is true of the Financial Accounting
Standards Board
1.

a.It has issued a series of pronouncements entitled Auditing Standards Updates.

2.

b.It was the forerunner of the current Accounting Principles Board.

3.

c.It is the arm of the Securities and Exchange Commission responsible for setting
financial accounting standards.

4.

d.The members of the FASB are appointed by the Financial Accounting Foundation.

Which of the following is a requirement for an accounting
principle to be called "generally accepted"?
1.

a.An authoritative accounting rule-making body has established it in an official
pronouncement.

2.

b.The principle has been accepted as appropriate because of its universal application.

3.

c.An authoritative accounting rule-making body has established it and it has been
accepted because of its universal application.

4.

d.None of the answer choices are correct.

How does accounting help the capital allocation process attract
investment capital?

1.

a.By providing timely, relevant information.

2.

b.By encouraging innovation.

3.

c.By promoting productivity.

4.

d.By providing timely, relevant information and by encouraging innovation.

All the following are differences between financial and
managerial accounting in how accounting information is
used except to
1.

a.plan and control company's operations.

2.

b.decide whether to invest in the company.

3.

c.evaluate borrowing capacity to determine the extent of a loan to grant.

4.

d.All the answer choices are correct.

The body that has the power to prescribe the accounting
practices and standards to be employed by companies
that fall under its jurisdiction is the
1.

a.FASB.

2.

b.AICPA.

3.

c.SEC.

4.

d.APB.

The role of the Securities and Exchange Commission in the
formulation of accounting principles can be best
described as
1.

a.consistently primary.

2.

b.consistently secondary.

3.

c.sometimes primary and sometimes secondary.

4.

d.non-existent.

A common set of accounting standards and procedures are
called
1.

a.financial accounting standards.

2.

b.generally accepted accounting principles.

3.

c.objectives of financial reporting.

4.

d.statements of financial accounting concepts.

Why did the AICPA create the Accounting Principles Board?
1.

a.The SEC disbanded the previous standard setting organization.

2.

b.The previous standard setting organization did not provide a structured set of
accounting principles.

3.

c.No such organization existed in the past.

4.

d.None of the answer choices are correct.

Which of the following will be of interest to investors in
decision-making?
1.

a.Assessing the company’s ability to generate net cash inflows.


2.

b.Assessing management’s ability to protect and enhance the capital providers’

investments.

3.

c.Both assessing the company’s ability to generate net cash inflows and assessing
management’s ability to protect and enhance the capital provider’s investments.

4.

d.Assessing the company’s ability to collect debts.

Why was it believed that accounting standards that were issued
by the Financial Accounting Standards Board would carry
more weight?
1.

a.Smaller membership.

2.

b.The FASB board members were well-paid.

3.

c.The FASB board members were CPAs.

4.

d.Due process.

Which of the following is a general limitation of "general
purpose financial statements"?
1.

a.General purpose financial statements may not be the most informative for a specific
enterprise.

2.

b.General purpose financial statements are not comparable.

3.

c.General purpose financial statements do not fairly present a company's financial
operations.

4.

d.None of the answer choices are correct.

General-purpose financial statements are the product of
1.

a.financial accounting.

2.

b.managerial accounting.

3.

c.both financial and managerial accounting.

4.

d.neither financial nor managerial accounting.

Which of the following is not a major challenge facing the
accounting profession?
1.

a.Nonfinancial measurements.

2.

b.Timeliness.

3.

c.Accounting for hard assets.


4.

d.Forward-looking information.

72 Free Test Bank for Intermediate Accounting 15th
Edition by Kieso Multiple Choice Questions - Page 2
Which of the following organizations have committed to
develop high-quality, compatible accounting standards

that could be used for domestic and cross-border
financial reporting
1.

a. The Financial Accounting Standards Board (FASB) and the International
Organization of Securities Commission (IOSCO)

2.

b. The Financial Accounting Standards Board (FASB) and the International Accounting
Standards Board (IASB)

3.

c. The International Accounting Standards Board (IASB) and International Organization
of Securities Commission (IOSCO)

4.

d. The International Accounting Standards Board (IASB) and the Standards Advisory
Council (SAC)

What is a possible danger if politics plays too big a role in
accounting standard setting?
1.

a.Accounting standards that are not truly generally accepted.

2.

b.Individuals may influence the standards.

3.

c.User groups become active.

4.

d.The FASB delegates its authority to elected officials.

The following are part of the "due process" system used by the
FASB in the evolution of a typical FASB Accounting
Standards Update: 1.Exposure Draft; 2.FASB Accounting
Standards Update; 3.Preliminary Views. The chronological
order in which these items are released is as follows:
1.

a.1, 2, 3.

2.

b.1, 3, 2.

3.

c.2, 3, 1.

4.

d.3, 1, 2.

The purpose of Statements of Financial Accounting Concepts is
to
1.

a.establish GAAP.

2.

b.modify or extend an existing FASB Accounting Standards Update.

3.

c.form a conceptual framework for solving existing and emerging problems.

4.

d.determine the need for FASB involvement in an emerging issue.

The IASB's standard-setting structure includes all of the
following except
1.

a. the Standing Interpretations Committee

2.

b. the Standards Advisory Council

3.

c. the Standards Comparison Committee

4.

d. the Trustees

What is not a reason that accounting standards may differ
across countries?
1.

a.Governments.

2.

b.Language.

3.

c.Culture.

4.

d.Past practice.

FASB Technical Bulletins
1.

a.are similar to FASB Interpretations in that they establish enforceable standards under

the AICPA's Code of Professional Ethics.

2.

b.are issued monthly by the FASB to deal with current topics.

3.

c.are not expected to have a significant impact on financial reporting in general and
provide guidance when it does not conflict with any broad fundamental accounting
principle.

4.

d.were recently discontinued by the FASB because they dealt with specialized topics
having little impact on financial reporting in general.

What would be an advantage of having all countries adopt and
follow the same accounting standards?
1.

a.Agreement.


2.

b.Comparability.

3.

c.Lower preparation costs.

4.

d.Comparability and lower preparation costs.

What is the purpose of a FASB Staff Position?
1.

a.Provide interpretation of existing standards.

2.

b.Provide a consensus on how to account for new and unusual financial transactions.

3.

c.Provide interpretive guidance.

4.

d.Provide timely guidance on select issues.

The American Institute of Certified Public Accountants (AICPA)
continues to be involved in all of the following except
1.

a.developing and enforcing professional ethics.

2.

b.developing auditing standards for public companies.

3.

c.providing professional education programs.

4.

d.All of the answer choices are correct.

The Financial Accounting Standards Board employs a "due
process" system which
1.

a.is an efficient system for collecting dues from members.

2.

b.enables interested parties to express their views on issues under consideration.

3.

c.identifies the accounting issues that are the most important.

4.

d.requires that all accountants must receive a copy of financial standards.

Which of the following is not a part of generally accepted

accounting principles?
1.

a.The FASB Interpretations

2.

b.The CAP Accounting Research Bulletins

3.

c.The APB Opinions

4.

d.All of these are part of generally accepted accounting principles.

The Financial Accounting Foundation
1.

a.oversees the operations of the FASB.

2.

b.oversees the operations of the AICPA.


3.

c.provides information to interested parties on financial reporting issues.

4.

d.works with the Financial Accounting Standards Advisory Council to provide information to interested parties on financial reporting issues.

Which of the following is not considered a component of
generally accepted accounting principles?
1.

a.FASB Implementation Guides.

2.

b.Widely recognized industry practices.

3.

c.Articles published in CPA journals.

4.

d.AICPA Accounting Interpretations.

Which of the following is not a publication of the FASB?
1.

a.Statements of Financial Accounting Concepts

2.

b.Accounting Research Bulletins

3.

c.Interpretations

4.

d.Technical Bulletins

Which of the following pronouncements were issued by the
Accounting Principles Board?
1.

a.Accounting Research Bulletins

2.

b.APB Opinions

3.

c.APB Statements of Position

4.

d.Statements of Financial Accounting Concepts

Which of the following organizations has not been instrumental
in the development of financial accounting standards in

the United States?
1.

a.AICPA

2.

b.FASB

3.

c.IASB

4.

d.SEC

Which of the following is an ethical concern of accountants?
1.

a.Earnings manipulation.


2.

b.Conservative accounting.

3.

c.Industry practices.

4.

d.None of these answers are correct.

What is the "expectations gap"?
1.

a.The difference between what the public thinks the accountant should not do and what
the accountant knows they should do.

2.

b.The difference between what the public thinks the accountant is doing and what
Congress says the accountant is doing.

3.

c.The difference between what the public thinks the accountant should do and what the
accountant thinks they can do.

4.

d.The difference between what the accountant is doing and what the Courts say the
accountant should be doing.

Which of these statements regarding the IFRS and U.S. GAAP is
correct?
1.

a. U.S. GAAP is considered to be "principles-based".

2.

b. U.S. GAAP is considered to be less detailed than IFRS.

3.

c. IFRS is considered to be "principles-based" and less detailed than U.S. GAAP

4.

d. Both U.S. GAAP and IFRS are considered to be "rules-based", but U.S. GAAP tends
to be more complex.

Which of the following organizations selects members for the
IASB?
1.

a. The Accounting Standards Committee Foundation

2.

b. The Standards Advisory Council

3.

c. The International Financial Reporting Interpretations Committee

4.

d. The International Accounting Standards Committee Foundation

The most significant current source of generally accepted
accounting principles is the
1.

a.AICPA.

2.

b.SEC.

3.

c.APB.


4.

d.FASB.

The purpose of the Emerging Issues Task Force is to
1.

a.develop a conceptual framework as a frame of reference for the solution of future
problems.

2.

b.lobby the FASB on issues that affect a particular industry.

3.

c.do research on issues that relate to long-term accounting problems.

4.

d.issue statements which reflect a consensus on how to account for new and unusual
financial transactions that need to be resolved quickly.

The major distinction between the Financial Accounting
Standards Board (FASB) and its predecessor, the
Accounting Principles Board (APB), is
1.

a.the FASB issues exposure drafts of proposed standards.

2.

b.all members of the FASB are fully remunerated, serve full time, and are independent
of any companies or institutions.

3.

c.all members of the FASB possess extensive experience in financial reporting.

4.

d.a majority of the members of the FASB are CPAs drawn from public practice.

Which of the following is a source of pressure that may
influence the accounting standard setting process?
1.

a.Congress.

2.

b.Lobbyist.

3.

c.CPA firms.

4.

d.All of these answers are correct.

The IASB consists of _________ part-time members.
1.

a. seven

2.

b. two

3.

c. three

4.

d. five


The purpose of the International Accounting Standards Board is
to
1.

a.issue enforceable standards which regulate the financial accounting and reporting of
multinational corporations.

2.

b.develop a uniform currency in which the financial transactions of companies throughout the world would be measured.

3.

c.promote uniform accounting standards among countries of the world.

4.

d.arbitrate accounting disputes between auditors and international companies.

Which of the following publications does not qualify as a
statement of generally accepted accounting principles?
1.

a.Statements of financial standards issued by the FASB

2.

b.Accounting interpretations issued by the FASB

3.

c.APB Opinions

4.

d.Accounting research studies issued by the AICPA

Which of the following is true of generally accepted accounting
principles?
1.

a.GAAP includes detailed practices and procedures as well as broad guidelines of
general application.

2.

b.GAAP is influenced by pronouncements of the SEC and IRS.

3.

c.GAAP changes over time as the nature of the business environment changes.

4.

d.All of these answer choices are correct.

Authoritative standards for IFRS include:
1.

a. International Financial Reporting Standards only.

2.

b. International Financial Reporting Standards and International Accounting Standards
only.

3.

c. International Financial Reporting Standards, International Accounting Standards and
U.S. GAAP only.

4.

d. International Financial Reporting Standards, International Accounting Standards and
any GAAP standard recognized by an organized stock exchange.


The purpose of the International Accounting Standards Board is
to:
1.

a. regulate stock prices at the international level.

2.

b. develop a uniform currency in which the financial transactions occur.

3.

c. develop a single set of high-quality financial reporting standards.

4.

d. arbitrate accounting disputes between auditors and international companies.

Which of the following organizations has not published
accounting standards?
1.

a.American Institute of Certified Public Accountants.

2.

b.Securities and Exchange Commission.

3.

c.Financial Accounting Standards Board.

4.

d.All of these have published accounting standards.

Rule 203 of the Code of Professional Conduct addresses:
1.

a.ethical requirements.

2.

b.financial statements being based on generally accepted accounting principles.

3.

c.advertising to obtain clients.

4.

d.auditing financial statements.

Members of the Financial Accounting Standards Board are
1.

a.employed by the American Institute of Certified Public Accountants (AICPA).

2.

b.part-time employees.

3.

c.required to hold a CPA certificate.

4.

d.independent of any other organization.

Financial accounting standard-setting in the United States
1.

a.can be described as a social process which reflects political actions of various
interested user groups as well as a product of research and logic.

2.

b.is based solely on research and empirical findings.

3.

c.is a legalistic process based on rules promulgated by governmental agencies.

4.

d.is democratic in the sense that a majority of accountants must agree with a standard
before it becomes enforceable.


Which of the following organizations is not among the four
international standard-setting organizations?
1.

a. The International Accounting Standards Committee Foundation (IASCF)

2.

b. The Standards Advisory Council (SAC)

3.

c. The International Financial Reporting Interpretations Committee (IFRIC)

4.

d. The Financial Executives Institute (FEI)


Free Text Questions
Objective of financial reporting: What is the objective of
financial reporting? How do general-purpose financial
statements help meet this objective.
Answer Given

The objective of 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 decisions about providing resources to the entity. General-purpose
financial statements provide financial reporting information to a wide variety of users.
They help shareholders, creditors, employees, and regulators to better understand a
company’s financial position and related performance.

The Financial Accounting Standards Board was established
because many groups interested in financial reporting
believed that the Accounting Principles Board was not
effective. Discuss the apparent advantages that the FASB

should have over its earlier counterpart, the APB.
Answer Given

1. Smaller membership. The FASB is composed of seven members, replacing the
relatively large 18-member APB.; 2. Full-time, remunerated membership. FASB
members are well-paid, full-time members, appointed for renewable five-year terms.
The APB members were unpaid and part-time.; 3. Greater autonomy. The APB was a
senior committee of the AICPA, whereas the FASB is not part of any single
professional organization. It is appointed by and answerable only to the Financial
Accounting Foundation.; 4. Increased independence. The APB members retained their
private positions with firms, companies, or institutions. The FASB members must sever
all such ties.; 5. Broader representation. All APB members were required to be CPAs
and members of the AICPA. Currently, it is not necessary to be a CPA to be a member
of the FASB.

Why would it be advantageous for U.S. GAAP and International
GAAP to be the same?
Answer Given


Relevant and reliable financial information is a necessity for viable capital markets.
Unfortunately, financial statements from companies outside the United States are often
prepared using different principles than U.S. GAAP. As a result, international
companies have to develop financial information in different ways. Beyond the
additional costs these companies incur, users of financial statements are often forced
to understand at least two sets of GAAP. It is not surprising that there is a growing
demand for one set of high quality international standards.

What is the difference between principles-based and rulesbased accounting rules? Is IFRS more principles-based
than U.S. GAAP? Explain.

Answer Given

Principles-based rules are considered to be based on accounting principles to result in
financial statements that are presented. Rules-based standards are generally quite
detailed, and in many instances follow a “check-box” mentality that some contend may
shield auditors and companies from legal liability. Because IFRS tends to be simpler
and less stringent in its accounting and disclosure requirements, it is generally
considered more principles-based than U.S. GAAP.