FACCOUNTING 102 INTERMEDIATE ACCOUNTING

CONCEPTUAL FRAMEWORK
QUIZ

1. Revision of the Conceptual Framework  will automatically lead to changes in Standards that are
inconsistent with the revised concepts.
A. True
B. False

2. How does the Conceptual Framework explain the role of stewardship? 

A. Providing information needed to assess management's stewardship is identified as an additional
objective of financial reporting, equal in prominence to providing financial information useful to
users in making decisions relating to providing resources to the entity
B. Decisions relating to providing resources to the entity depend on users' assessment of the
amount, timing and uncertainty of the prospects for future net cash inflows to the entity and on
their assessment of management's stewardship
C. Providing information needed to assess stewardship is more important than providing
information needed to assess the prospects for future cash inflows to the entity
D. Financial reports are not intended to provide information needed to assess stewardship

3. A trade-off between the fundamental qualitative characteristics of relevance and faithful

representation may need to be made in order to meet the objective of financial reporting.
A. True
B. False

4. Consolidated financial statements provide information about the assets, liabilities, equity, income
and expenses of both the parent and its subsidiaries as:
A. Separate reporting entities
B. A partnership
C. A single reporting entity
D. A legal entity

5. The Conceptual Framework defines a liability as:

A. A present obligation of the entity to transfer an economic resource as a result of past events
B. A present obligation of the entity arising from past events, the settlement of which is expected
to result in an outflow from the entity of resources embodying economic benefits
C. An amount the entity may have to pay after the end of the reporting period
D. None of the above

6. Which factors may indicate that recognition of an item meeting the definition of an asset or a
liability may not provide relevant information?
A. Uncertainty about whether an asset or liability exists
B. Low probability of an inflow or outflow of economic benefits
C. Other factors
D. All of the above.
E. None of the above

7. The Conceptual Framework  identifies a preferred measurement basis for all assets and liabilities.
A. True
B. False

8. What does the Conceptual Framework  say about profit or loss?

A. The statement of profit or loss is the only source of information about an entity’s financial
performance for the period
B. In principle, all income and expenses are included in the statement of profit or loss
C. All income and expenses included in profit or loss arise from ordinary activities of the entity
D. All of the above
E. None of the above
9. Financial reports need to provide information useful in making decisions relating to providing
resources to the entity.  Those decisions include decisions about exercising rights to vote on, or
otherwise influence, management's actions that affect the use of the entity's economic resources.
A. True 
B. False 

10. For information to be relevant, it has to possess:

A. Only predictive value
B. Only confirmative value
C. Both predictive and confirmatory value
D. Either predictive or confirmatory value 
 
11. When a reporting entity is not a legal entity and does not comprise only legal entities all linked by a
parent-subsidiary relationship, the boundary of the reporting entity can contain an incomplete set of
economic activities if that entity provides a description of how the boundary was determined.
A. True 
B. False 

12. If an entity has a legal ownership of a physical object, its asset is:
A. The set of rights arising from legal ownership of the physical object
B. The physical object
C. The economic benefits that may flow from the physical object
D. All of the above
E. None of the above

13. Some items that do NOT meet the definition of an asset, a liability or equity may be recognised in
the statement of financial position.
A. True
B. False 

14. Which of the following factors is (or are) considered in selecting a measurement basis?
A. Variability of cash flows of the asset or liability
B. How the asset or liability contributes to future cash flows, which depends in part on the nature
of an entity's business activities
C. The level of measurement uncertainty associated with a particular measurement basis
D. All of the above 
E. None of the above

15. In principle, all income and expenses are included in the statement of profit or loss.
A. True 
B. False

16. If an IFRS Standard sets out requirements that are inconsistent with the Conceptual
Framework,  preparers have to apply the Conceptual Framework  for affected transactions.
A. True
B. False

17. The objective of general purpose financial reporting as described in the Conceptual Framework is to:
A. Provide information to regulators
B. Support the entity's tax return
C. Meet the information needs of an entity's stakeholders
D. Provide financial information about the reporting entity that is useful to existing and potential
investors, lenders and other creditors in making decisions relating to providing resources to the
entity 

18. What drives the determination of the boundary of a reporting entity that is not a legal entity and
does not comprise only legal entities all linked by a parent-subsidiary relationship?
 A. Management's choice
B. Legal form of the reporting entity
C. Information needs of the primary users of the reporting entity 
D. All of the above 
E. None of the above

19. The residual interest in the assets of an entity after deducting all its liabilities is:
A. Income
B. Profit or loss
C. Equity 
D. Other comprehensive income

20. A high level of measurement uncertainty associated with an asset always results in the asset not
being recognised.
A. True
B. False 

21. Which measurement bases are categorised as current value measurement bases in the Conceptual
Framework?
A. Value in use
B. Fair value
C. Fulfilment value
D. Current cost
E. All of the above 

22. An entity may decide to include income or expenses in other comprehensive income when doing so
would result in the statement of profit or loss providing more relevant information, or providing a
more faithful representation of the entity's performance for the period.
A. True 
B. False 

23. Information needed to assess management's stewardship is always different from information
needed to assess the prospects for future net cash inflows to the entity.
A. True
B. False 

24. The Conceptual Framework describes prudence as:

A. The exercise of caution when making judgements under conditions of uncertainty 
B. A bias towards understating assets or income and towards overstating liabilities or expenses
C. A preference towards the earlier recognition of expenses and liabilities than of income and
assets
D. A mechanism for smoothing profits over time (understate profits in good years and overstate
profits in bad years)
 
25. When a reporting entity is not a legal entity and does not comprise only legal entities all linked by a
parent-subsidiary relationship, the boundary of the reporting entity can contain an incomplete set of
economic activities if that entity provides a description of how the boundary was determined.
A. True 
B. False 

26. What does the Conceptual Framework  state about derecognition?

A. For an asset, derecognition normally occurs when the entity loses control of all or part of the
recognised asset
B. For a liability, derecognition normally occurs when the entity no longer has a present obligation
for all or part of the recognised liability
C. Derecognition is the removal of all or part of a recognised asset or liability from an entity's
statement of financial position 
D. All of the above 
27. In selecting a measurement basis for an asset or liability, it is more important to consider the nature
of the information that the measurement basis will produce in the statement(s) of financial
performance than in the statement of financial position.
A. True
B. False 

28. An analysis of income and expenses recognised in the statement of profit or loss is sufficient to
understand an entity's financial performance for the period.
A. True
B. False 

29. Only a legal entity can be a reporting entity.

A. True
B. False 

30. In explaining the meaning of the term 'obligation' in the definition of a liability, the Conceptual
Framework  states:
A. That an obligation is a duty or responsibility that an entity has no practical ability to avoid
B. That an obligation can arise from a duty or responsibility conditional on a future action that the
entity itself may take, if the entity has no practical ability to avoid taking that action
C. That an obligation can arise from an entity’s customary practices, published policies or specific
statements, if the entity has no practical ability to avoid those practices, policies or statements
D. All of the above 
 
31. Income and expenses included in other comprehensive income:
A. Are never reclassified (recycled) from other comprehensive income into the statement of profit
or loss
B. Are recycled into the statement of profit or loss if the International Accounting Standards Board
decides that doing so results in the statement of profit or loss providing more relevant
information, or providing a more faithful representation of the entity’s financial performance for
that period 
C. Are always recycled into the statement of profit or loss at the end of the holding period of the
related asset or liability

32. The fundamental qualitative characteristics of useful financial information are: 

A. Comparability and relevance
B. Relevance and reliability
C. Relevance, reliability and comparability
D. Relevance and faithful representation  
E. Comparability, relevance and faithful representation

33. Entities have to apply the revised Conceptual Framework:

A. Immediately after it is issued
B. For annual reporting periods beginning on or after 1 January 2020, with early application
permitted
C. Never - the Conceptual Framework is only used by the International Accounting Standards Board
D. Feedback

34. When developing requirements for IFRS Standards, can the International Accounting Standards
Board depart from the Conceptual Framework?
A. No
B. Yes, the Board is not required to use the Conceptual Framework when developing Standards
C. Yes, but only from aspects of the Conceptual Framework and only if doing so is needed to meet
the objective of financial reporting 
35. For a right to meet the definition of an asset, it needs to be likely that the right will produce
economic benefits for the entity.
A. True
B. False 

36. A high level of measurement uncertainty associated with an asset always results in the asset not
being recognised.
A. True
B. False 

37. A reporting entity can be:

A. A portion of an entity
B. A single entity
C. More than one entity
D. All of the above
E. None of the above

38. The Conceptual Framework can override requirements in a Standard.

A. True
B. False

39. Which statement is included in the Conceptual Framework?

A. Relevance is a fundamental qualitative characteristic of useful financial information
B. Financial information without both relevance and faithful representation is not useful
C. Enhancing qualitative characteristics cannot make information useful if that information is
irrelevant or does not provide a faithful representation of what it purports to represent
D. All of the above
E. None of the above

40. Recognition is the process of:

A. Capturing, for inclusion in the statement of financial position or the statement(s) of financial
performance, an item that meets the definition of one of the elements of the financial
statements—an asset, a liability, equity, income or expenses
B. Determining where an item should be presented in the financial statements
C. Sorting assets, liabilities, equity, income or expenses on the basis of shared characteristics