Contemporary Issues in Accounting: Accounting Theory - Chapter 6 Flashcards


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1

.What is the key element of the IASB definition of the reporting entity?

a. The existence of a broad range of users who want information
b. The legal requirements of the country in which the entity resides
c. The existence of investors and creditors who cannot directly obtain information
d. The existence of scarce resources

c.

2

What is NOT one of the key elements of control?

a. Ownership
b. Variable returns
c. Influence over returns
d. None of the above, i.e. they are all elements of control

a.

3

Which of the following is NOT an argument for a standardized annual reporting period?

a. It allows investors to compare entities more easily
b. It is necessary to calculate an annual dividend
c. Most businesses operate on a natural 12 month cycle
d. Various laws require regular information be produced by the entity

c.

4

Which of the following is an argument for more flexible reporting periods?

a. It makes it less attractive for entities to manipulate profits
b. It enhances comparability
c. It makes dividend calculation easier
d. It is widely supported

a.

5

Manipulation of reported earnings:

a. Can be both legal and illegal
b. Includes income smoothing
c. Affects wealth transfers between the company and others
d. All of the above

d.

6

Earnings Management:

a. is always illegal
b. depends on timing difference between cash and accrual accounting
c. is always bad for shareholders
d. None of the above

b.

7

Income smoothing

a. Aims to produce a steady growth in the profit stream
b. Transfers wealth from new shareholders to management
c. Is only possible when sufficient profits are regularly made
d. All of the above

d.

8

Approximately what percentage of the real value of companies is thought to be the result of intangible assets?

a. 10%
b. 30%
c. 50%
d. 70%

d.

9

Intangible assets are defined as

a. One-sided financial assets
b. Unidentifiable assets without physical
c. Identifiable non-monetary assets without physical substance
d. All of the above

c.

10

Which of the following intellectual capital could be included in the Statement of Financial Position?

a. Training of programmers employed by a company
b. Development of software by the company for internal use
c. Development of software by the company for external use
d. None of the above

c.

11

The annual report

a. May have significant additional voluntary disclosure in the financial statements
b. Is used for impression management
c. Is thought to have little influence on stakeholder perceptions
d. Is not thought to be an important information avenue for organizations

b.

12

The kinds of information likely to be included in the annual report includes

a. Corporate governance
b. Environmental performance
c. Occupational health and safety disclosures
d. All of the above

d.

13

Annual reports contain many financial graphics, it has been noted that

a. They are mostly unhelpful in summarizing data
b. They are irrelevant to most users
c. They are frequently distorted to improve perceptions of performance
d. All of the above

c.

14

Which of the following has NOT been identified as a reason that management might voluntarily disclose information in annual reports

a. To mislead competitors
b. To manage powerful stakeholders
c. To win reporting awards
d. To forestall regulation

a.

15

Corporate social responsibility

a. Is concerned about the environmental impact of organizations
b. Suggests that companies can build shareholder value by engaging other stakeholders
c. Still means organizations should pursue profit
d. All of the above

d.

16

Legitimacy theory suggests that corporate social disclosure will be used to

a. Signal deeply held ethical values of the entity
b. Manage the concerns of key stakeholders
c. Disclose all firm activities, good or bad
d. The minimal degree possible

b.