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    Ch06 TB Rankin

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    Anton Vitali
    The document is a testbank with multiple choice questions about chapter 6 of a textbook on contemporary issues in accounting. The chapter covers the key products of the financial reporting process including the identification of the reporting entity, debates around reporting periods, earnings manipulation, treatment of intangibles, annual reports and voluntary disclosures.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Ch06 TB Rankin

    Uploaded by

    Anton Vitali
    271 views7 pages
    The document is a testbank with multiple choice questions about chapter 6 of a textbook on contemporary issues in accounting. The chapter covers the key products of the financial reporting process including the identification of the reporting entity, debates around reporting periods, earnings manipulation, treatment of intangibles, annual reports and voluntary disclosures.

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    Testbank to accompany Contemporary issues in Accounting by Michaela Rankin Ch06

    Original Title

    Ch06 Tb Rankin

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    The document is a testbank with multiple choice questions about chapter 6 of a textbook on contemporary issues in accounting. The chapter covers the key products of the financial reporting process including the identification of the reporting entity, debates around reporting periods, earnings manipulation, treatment of intangibles, annual reports and voluntary disclosures.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    271 views7 pages

    Ch06 TB Rankin

    Uploaded by

    Anton Vitali
    The document is a testbank with multiple choice questions about chapter 6 of a textbook on contemporary issues in accounting. The chapter covers the key products of the financial reporting process including the identification of the reporting entity, debates around reporting periods, earnings manipulation, treatment of intangibles, annual reports and voluntary disclosures.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    The document discusses topics related to financial reporting such as the identification of the reporting entity, reporting periods, manipulation of earnings, intangible assets, and voluntary disclosures.

    The main topics covered include identification of the reporting entity, reporting periods, manipulation of earnings, intangible assets, and voluntary disclosures such as in annual reports.

    Some arguments for flexible reporting periods include that it makes it less attractive to manipulate profits. Some arguments against include that it reduces comparability between entities. The document also discusses income smoothing as a form of manipulation.

    Testbank

    to accompany

    Contemporary Issues in Accounting

    Michaela Rankin, Patricia Stanton, Susan


    McGowan, Matthew Tilling, Kimberly
    Ferlauto & Carol Tilt

    Prepared by
    Matt Tilling

    John Wiley & Sons Australia, Ltd 2012


    Chapter 6 Products of the financial reporting process

    Chapter 6 Products of the financial reporting process


    Multiple Choice Questions

    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

    Correct answer: c
    Learning Objective 6.1 ~ Evaluate the importance of the identification of the reporting entity.

    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

    Correct answer: a
    Learning Objective 6.1 ~ Evaluate the importance of the identification of the reporting entity.

    3. Which of the following is NOT an argument for a standardised 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

    Correct answer: c
    Learning Objective 6.2 ~ Outline the debate surrounding the length and frequency of reporting
    periods.

    John Wiley & Sons Australia, Ltd 2012 6.1


    Testbank to accompany Contemporary Issues in Accounting

    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

    Correct answer: a
    Learning Objective 6.2 ~ Outline the debate surrounding the length and frequency of reporting
    periods.

    5. AASB 134 Interim Reporting mandates:

    *a. The minimum contents of interim financial reports


    b. Who must prepare interim financial reports
    c. That interim financial reports should be prepared at least once per year
    d. All of the above

    Correct answer: a
    Learning Objective 6.3 ~ Discuss the practice of manipulating reported earnings in the
    production of financial information.

    6. 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

    Correct answer: d
    Learning Objective 6.3 ~ Discuss the practice of manipulating reported earnings in the
    production of financial information.

    7. 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

    Correct answer: b
    Learning Objective 6.3 ~ Discuss the practice of manipulating reported earnings in the
    production of financial information.

    John Wiley & Sons Australia, Ltd 2012 6.2


    Chapter 6 Products of the financial reporting process

    8. 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

    Correct answer: d
    Learning Objective 6.3 ~ Discuss the practice of manipulating reported earnings in the
    production of financial information.

    9. Pro forma reports

    a. Are simply IFRS compliant reports


    b. Are GAAP compliant reports
    c. Usually show a lower profit figure than those prepares in accordance with
    accounting standards
    *d. Usually show a higher profit figure than those prepares in accordance with
    accounting standards

    Correct answer: d
    Learning Objective 6.3 ~ Discuss the practice of manipulating reported earnings in the
    production of financial information.

    10. 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%

    Correct answer: d
    Learning Objective 6.4 ~ Outline the debate surrounding the exclusion of intangibles and
    intellectual capital from the financial reporting process.

    John Wiley & Sons Australia, Ltd 2012 6.3


    Testbank to accompany Contemporary Issues in Accounting

    11. 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

    Correct answer: c
    Learning Objective 6.4 ~ Outline the debate surrounding the exclusion of intangibles and
    intellectual capital from the financial reporting process.

    12. Which of the following is specifically prohibited from recognition as an intangible asset
    according to AASB138?

    a. Internally generated brands


    b. Research
    c. Training
    *d. All of the above

    Correct answer: d
    Learning Objective 6.4 ~ Outline the debate surrounding the exclusion of intangibles and
    intellectual capital from the financial reporting process.

    13. 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

    Correct answer: c
    Learning Objective 6.4 ~ Outline the debate surrounding the exclusion of intangibles and
    intellectual capital from the financial reporting process.

    John Wiley & Sons Australia, Ltd 2012 6.4


    Chapter 6 Products of the financial reporting process

    14. 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 organisations

    Correct answer: b
    Learning Objective 6.5 ~ Explain the options available to companies reporting voluntary
    disclosures.

    15. 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

    Correct answer: d
    Learning Objective 6.5 ~ Explain the options available to companies reporting voluntary
    disclosures.

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

    a. They are mostly unhelpful in summarising data


    b. They are irrelevant to most users
    *c. They are frequently distorted to improve perceptions of performance
    d. All of the above

    Correct answer: c
    Learning Objective 6.5 ~ Explain the options available to companies reporting voluntary
    disclosures.

    17. Extensible business reporting language (XBRL) is expected to

    a. Benefit all businesses, large to small


    b. Ease the burden of reporting to governments
    c. Facilitate better corporate analysis
    *d. All of the above

    Correct answer: d
    Learning Objective 6.5 ~ Explain the options available to companies reporting voluntary
    disclosures.

    John Wiley & Sons Australia, Ltd 2012 6.5


    Testbank to accompany Contemporary Issues in Accounting

    18. 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

    Correct answer: a
    Learning Objective 6.6 ~ Identify three theories that explain the motivation for voluntary
    disclosures in annual reports.

    19. Corporate social responsibility

    a. Is concerned about the environmental impact of organisations


    b. Suggests that companies can build shareholder value by engaging other
    stakeholders
    c. Still means organisations should pursue profit
    *d. All of the above.

    Correct answer: d
    Learning Objective 6.6 ~ Identify three theories that explain the motivation for voluntary
    disclosures in annual reports.

    20. 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

    Correct answer: b
    Learning Objective 6.6 ~ Identify three theories that explain the motivation for voluntary
    disclosures in annual reports.

    John Wiley & Sons Australia, Ltd 2012 6.6

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