Accounting Standard Setting Bodies and Process

HOMEWORK ON ACCOUNTING STANDARD SETTING
BODIES AND PROCESS
1. Accounting concepts are not derived from which of the following?

A) experience C) inductive reasoning
B) laws of nature D) pragmatism (practicality)
2. Generally accepted accounting principles

A) derive their authority from legal court proceedings.
B) have been specified in detail in the Conceptual Framework.
C) are fundamentally truths or axioms that can be derived from laws of nature.
D) derive their credibility and authority from general recognition and acceptance by the accounting
profession.
3. To qualify as generally accepted, accounting principles must

A) receive substantial authoritative support.
B) guide entrepreneur of the choice of an accounting entity like a sole proprietorship, partnership or
corporation.
C) usually guide corporate managers in preparing financial statements, which will be understood by
widely scattered shareholders.
D) guide corporate managers in preparing financial statements, which will be used for collective
bargaining agreements with trade unions.
4. Which of the following statements regarding accounting theory is incorrect?

A) Accounting concepts are human-made.
B) Accounting concepts are components of accounting theory.
C) Accounting theory has developed primarily in response to government regulations.
D) Accounting theory can be defined as a coherent set of hypothetical, conceptual and pragmatic
principles that form a general frame of reference for a field of inquiry
5. Proper application of accounting principles is most dependent upon the

A) external audit function. C) oversight of regulatory bodies.
B) existence of specific guidelines. D) professional judgement of the accountant.
6. Which of the following is not a source of generally accepted accounting principles in the Philippines?
A) Existing practices in the Philippines.
B) Available literature on the topic or subject under study.
C) Pronouncements by Association of CPAs in Public Practice.
D) Statements, recommendations, studies, or standards issued by standard-setting bodies such as the
International Accounting Standards Board and the Financial Accounting Standards Board.
7. Which of the following statements is a valid statement relating to financial reporting standards?
A) To be consistent, the standards should not be revised.
B) The standards are continually reviewed to see if modification is necessary.
C) The standards are reviewed only upon the recommendation of the Securities and Exchange
Commission.
D) The Philippine Institute of Certified Public Accountants is the sole organization that is tasked to
review the financial reporting standards to see if any modification is necessary.
8. The Financial Accounting Standards Board (FASB) publishes standards called

A) Financial Reporting Standards (FRS)
B) International Accounting Standards (IAS)
C) International Financial Reporting Standards (IFRS)
D) Statement of Financial Accounting Standards (SFAS)
9. It is a memorandum of agreement made between IASB and FASB (US) with the goal of achieving
comparability in financial reporting standards by eliminating or minimizing differences between IFRS
and US GAAP.
A) The IASB-FASB Pact C) The Norwalk Agreement
B) The Convergence Covenant D) The Reporting Standard Treaty
10. The IFRS Foundation and the International Accounting Standards Board aims to develop IFRS Standards
that bring all of the following items to financial markets around the world, except
A) efficiency C) transparency
B) profitability D) accountability
11. The IFRS Foundation is an independent, privately organized, not-for-profit organization, operating to
serve the public interest. Which of the following statements is incorrect concerning its structure?
A) The organization is overseen by a Monitoring Board, consisting of public authorities, such as
financial market regulators.
B) The Trustees are responsible for the governance and oversight of the Board, promoting IFRS
Standards and securing the organization’s funding.
C) The International Accounting Standards Board is the standard-setting body, made up of experts
from diverse professional backgrounds and geographical regions.
D) The Securities and Exchange Commission of countries using IFRS are tasked for the
implementation and imposition of penalties for non-compliance.
12. Which of the following describes the role of the IFRS Advisory Council?
A) It is the independent standard-setting body of the IFRS Foundation.
B) It is the formal advisory body to the International Accounting Standards Board (Board) and the
Trustees of the IFRS Foundation.
C) It is a not-for-profit, public interest organization established to develop a single set of high-quality,
understandable, enforceable and globally accepted accounting standards—IFRS Standards—and to
promote and facilitate adoption of the standards.
D) It is to come up with guidelines known as “Interpretations” for Financial Statements users in case
new problems arise and/or existing standards are being interpreted in unsatisfactory or conflicting
ways.
13. The IASB declared that the merits of proposed standards are assessed
A) from a position of neutrality. C) based on arguments of lobbyist.
B) from a position of materiality. D) based on possible impact on behavior.
14. Determine the true statement regarding IFRS when referred collectively
A) The term “IAS” generally includes “IFRS”. C) The term “IAS generally includes “IFRIC”.
B) The term “IFRS” generally includes “IAS”. D) The term “IFRIC” generally includes
“IFRS”.
15. IFRIC Interpretations (choose the incorrect one)

A) are considered authoritative and must be followed.
B) are made to evaluate, improve and replace the current standards.
C) cover newly identified financial reporting issues not specifically addressed.
D) cover issues where unsatisfactory or conflicting interpretations have developed.
16. Financial accounting standard-setting

A) is based solely on research and empirical findings.
B) is a legalistic process based on rules promulgated by governmental agencies.
C) is democratic in the sense that a majority of accountants must agree with a standard before it
becomes enforceable.
D) 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
17. The process of establishing financial reporting standards is
A) a legislative process based on the rules promulgated by government agencies.
B) based solely on economic analysis of the effects each standard will have if it is implemented.
C) a democratic process in that a majority of practicing accountants must agree with a standard before
it becomes implemented.
D) a social process, which incorporates political actions of various interested user groups as well as
professional research and logic.
18. What is a possible danger if politics plays too big a role in developing IFRS?
A) User groups become active.
B) Individuals may influence the standards.
C) The IASB delegates its authority to elected officials.
D) Financial reporting standards are not truly generally accepted.
19. The following are part of “due process” in the context of standard-setting by IASB, except:
A) IASB operates in full view of the public.
B) Interested parties can make their views known.
C) Public hearings are held on proposed standards.
D) Interested parties’ approval must be secured before a standard can be issued.
20. The International Accounting Standards Board (IASB) follows specific steps in developing International
Financial Reporting Standards (IFRS). Place the following steps in the correct order:
I. Reviews of new Standards are carried out and, if needed, amendments are proposed and consulted on.
The IFRS Interpretations Committee may also decide to create an interpretation of the Standard.
II. Research is conducted to assess possible accounting problems, develop possible solutions and decide
whether standard-setting is required. Public views are usually sought via a Discussion Paper.
III. Building on the research, specific proposals are developed and consulted on publicly via an Exposure
Draft. Feedback is debated by the Board before a Standard is finalized or amended.
IV. The Board consults the public on its technical work plan every five years. The work of the IFRS
Interpretations Committee and post-implementation reviews of Standards may also add topics to the work
plan.
A) I, IV, II, III C) IV, II, III, I
B) II, II, I, IV D) II, III, IV, I
21. Which of the following is not a description or a function of the Financial Reporting Standards Council
(FRSC)?
A) Its main function is to establish generally accepted accounting principles in the Philippines.
B) It receives financial support principally from the Professional Regulation Commission (PRC).
C) It is the successor of Accounting Standards Council (ASC) & the creator of Philippine
Interpretations Committee (PIC).
D) It assists the Professional Regulatory Board of Accountancy (BoA) in carrying out its power and
function to promulgate accounting standards in the Philippines.
22. What is the proper order of the FRSC due process?

I. Issuing for comment an exposure draft approved by a majority of the FRSC members; (comment
period 30 – 60 days).
II. Approval of a standard or an interpretation by a majority of the FRSC members.
III. Consideration of pronouncement of IASB.
IV. Consideration of all comments received within the comment period and, when appropriate, preparing
a comment letter to the IASB.
V. Formation of a task force, when deemed necessary, to give advice to the FRSC.
A) III, I, V, IV, II C) V, III, I, IV, II
B) I, V, III, IV, II D) III, V, I, IV, II
23. Which is not part of the financial reporting standard setting process in the Philippines?
A) Publication in the PRC Official Gazette and in a newspaper of general circulation.
B) Creation of a task force by the standard setting body to study the proposed accounting standard.
C) Distribution of the exposure draft for comment to CPA professionals and other interested parties.
D) Approval by Financial Reporting Standards Council (FRSC) & eventually by Professional
Regulations Commission(PRC)
24. Which of the following is not directly involved in the accounting standard-setting “due process” in the
Philippines?
A) Board of Accountancy (BoA)
B) Bureau of Internal Revenue (BIR)
C) Professional Regulation Commission (PRC)
D) Financial Reporting Standards Council (FRSC)
25. The primary purpose of the Securities and Exchange Commission is to

A) prevent the trading of speculative securities.
B) ensure that investors have adequate information.
C) enforce generally accepted accounting principles.
D) issue accounting and auditing regulations for publicly held enterprises.

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HOMEWORK ON ACCOUNTING STANDARD SETTING

BODIES AND PROCESS

1. Accounting concepts are not derived from which of the following?

2. Generally accepted accounting principles

3. To qualify as generally accepted, accounting principles must

4. Which of the following statements regarding accounting theory is incorrect?

5. Proper application of accounting principles is most dependent upon the

8. The Financial Accounting Standards Board (FASB) publishes standards called

15. IFRIC Interpretations (choose the incorrect one)

16. Financial accounting standard-setting

22. What is the proper order of the FRSC due process?

25. The primary purpose of the Securities and Exchange Commission is to

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