ACC 303 Week 2 Discussion 1

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Week 2 Homework

Brief Exercise 2-1

 Select the qualitative characteristics for the following statements.

(a) Quality of information that permits users to identify similarities in and differences between two sets of economic phenomena.                 

(b) Having information available to users before it loses its capacity to influence decisions.                                                                  

(c) Information about an economic phenomenon that has value as an input to the processes used by capital providers to form their own expectations about the future.                                                               

(d) Information that is capable of making a difference in the decisions of users in their capacity as capital providers.                                                                 

(e) Absence of bias intended to attain a predetermined result or to induce a particular behavior.                         

Brief Exercise 2-9

If the going concern assumption is not made in accounting, what value would be disclosed in the financial statements for the following items.

(a)                   Land                                                              

(b)                   Unamortized bond premium                                                                     

(c)                   Depreciation expense on equipment                                                                   

(d)                   Inventory                                                                  

(e)                   Prepaid insurance                 

Brief Exercise 2-12

 What accounting assumption, principle, or constraint would Target Corporation use in each of the situations below?

(a) Target was involved in litigation over the last year. This litigation is disclosed in the financial statements.                                                               

(b) Target allocates the cost of its depreciable assets over the life it expects to receive revenue from these assets.                                                            

(c) Target records the purchase of a new Dell PC at its cash equivalent price.                      

Exercise 2-1

Indicate whether the following statements about the conceptual framework are true or false.

(a) Accounting rule making that relies on a body of concepts will result in useful and consistent pronouncements.                   

(b) General-purpose financial reports are most useful to company insiders in making strategic business decisions.                   

(c)  Accounting standards based on individual conceptual frameworks generally will result in consistent and comparable accounting reports.                                                                    

(d) Capital providers are the only users who benefit from general-purpose financial reporting.                                                              

(e) Accounting reports should be developed so that users without knowledge of economics and business can become informed about the financial results of a company.                      

(f) The objective of financial reporting is the foundation from which the other aspects of the framework logically result.                    

Exercise 2-2

Indicate whether the following statements about the conceptual framework are true or false.

(a) The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability.                                                                 

(b) Relevant information only has predictive value, confirmatory value, or both.                

(c) Information that is a faithful representation is characterized as having predictive or confirmatory value.                                                            

(d) Comparability pertains only to the reporting of information in a similar manner for different companies.                 

(e) Verifiability is solely an enhancing characteristic for faithful representation.                

(f) In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities.              

Exercise 2-4

.

Identify the appropriate qualitative characteristic(s) to be used given the information provided below.

(a)  Qualitative characteristic being employed when companies in the same industry are using the same accounting principles.                                                       

(b)   Quality of information that confirms users’ earlier expectations.                                                     

      (c ) Imperative for providing comparisons of a company from period to period.                        

      (d) Ignores the economic consequences of a standard or rule.                    

      (e)Requires a high degree of consensus among individuals on a given measurement.             

       (f) Predictive value is an ingredient of this fundamental quality of information.                     

      (g)Four qualitative characteristics that are related to both relevance and faithful representation.                   

      (h)An item is not recorded because its effect on income would not change a decision.                       

(I )Neutrality is an ingredient of this fundamental quality of accounting information.                                                                  

(j)Two fundamental qualities that make accounting information useful for decision-making purposes.                                                            

(k)Issuance of interim reports is an example of what enhancing quality of relevance?                   

Exercise 2-7

Presented below are a number of operational guidelines and practices that have developed over time.

Select the assumption, principle, or constraint that most appropriately justifies these procedures and practices. (Do not use qualitative characteristics.)

(a) Fair value changes are not recognized in the accounting records.              

(b) Financial information is presented so that investors will not be misled.               

(c) Intangible assets are amortized over periods benefited.                   

(d) Agricultural companies use fair value for purposes of valuing crops.                  

(e) Each enterprise is kept as a unit distinct from its owner or owners.                       

(f) All significant post-balance-sheet events are disclosed.                  

(g) Revenue is recorded when the product is delivered.                        

(h)  All important aspects of bond indentures are presented in financial statements.                       

(i)  Rationale for accrual accounting.                    

(j)  The use of consolidated statements is justified.                    

(k)       Reporting must be done at defined time intervals.                      

(l)        An allowance for doubtful accounts is established.                    

(m)      Goodwill is recorded only at time of purchase.               

(n)       A company charges its sales commission costs to expense.                  

IFRS Practice Question 01

Which of the following statements about the IASB and FASB conceptual frameworks is not correct?

a)     The IASB conceptual framework does not identify the element comprehensive income.

b)     The existing IASB and FASB conceptual frameworks are organized in similar ways.

c)     The FASB and IASB agree that the objective of financial reporting is to provide useful information to investors and creditors.

d)     IFRS does not allow use of fair value as a measurement basis.

IFRS Practice Question 02

Which of the following statements is false?

a)     The monetary unit assumption is used under IFRS.

b)     The FASB and IASB are no longer working on a joint conceptual framework project.

c)     Under IFRS, companies may use fair value for property, plant, and equipment.

d)     Under IFRS, there are the same number of financial statement elements as in GAAP.

IFRS Practice Question 03

 Companies that use IFRS:

a)     Must report all their assets on the statement of financial position (balance sheet) at fair value.

b)     May report property, plant, and equipment and natural resources at fair value.

c)     May refer to a concept statement on estimating fair values when market data are not available.

d)     May only use historical cost as the measurement basis in financial reporting 

IFRS Practice Question 04

 The issues that the FASB and IASB must address in developing a conceptual framework include all of the following except:

a)     Should a single measurement method such as historical cost be used?

b)     Should the role of financial reporting focus on internal decision-making as well as providing information to assist users in decision-making?

c)     Should the characteristic of relevance be traded-off in favor of information that is verifiable?

d)     What are the key elements of asset and liability definitions?

IFRS Practice Question 05

 With respect to the IASB conceptual framework project:

a)     Work is being conducted to produce separate discussion papers.

b)     Work is being conducted to result in a discussion paper covering all the identified areas.

c)     Work is being conducted with the FASB.

d)     The framework will not address elements of financial statements.