Which of the following statement was not identified as a benefit of international

harmonisation?

Select one:
a. It was likely to improve the quality of financial reporting in Australia to best
international practice.
b. It was likely to increase the comparability of financial reports prepared in different
countries.
c. It was likely to allow more meaningful comparisons of the financial performance and
financial position of Australian and foreign public sector reporting entities.

d. It was likely to reduce the reporting costs for Australia's not-for-profit entities and
local governments.
Which of the following statement(s) is/are true of the qualitative characteristic 'faithful
representation'?

Select one:
a. Information that should affect the decisions of financial statement users.
b. Information that is free from material bias and error, complete description and that
faithfully represents what it purports to represent.
c. Information that is free from material bias and error.

d. Information that faithfully represents what it purports to represent.

Which of the following measurement bases are acceptable for property, plant and
equipment?
Select one:
a. Historical cost.
b. Revaluation model.
c. Historical cost and revaluation model.

d. Fair value model.

Which of the following factors should be considered in order to determine whether an
entity is a reporting entity when it is not obvious that users exist who would be
dependent on the financial reports of the entity?

Select one:
a. Financial characteristics.
b. Economic or political importance/influence.
c. Separation of management from those with economic interest in the entity and
economic or political importance/influence.

d. Separation of management from those with economic interest in the entity.

When a standard restricts the number of accounting methods to be used to account for
a particular accounting issue, it is promoting the qualitative characteristic of
______________?
Select one:
a. prudence
b. comparability
c. timeliness

d. understandability
What are two key ways management accounting is different from financial accounting?

Select one:
a. Management accounting is focused on providing information to shareholders who
wish to have input into the management of the organisation and it is regulated by
generally accepted accounting principles.
b. Management accounting provides special-purpose information to people external to
the firm and it is highly regulated.
c. Management accounting provides information for the day-to-day running of an
organisation and it is governed by the requirements of ASIC.

d. Management accounting focuses on providing information for internal users and it is

largely unregulated.
Triple-bottom-line reporting has been defined as providing information about:

Select one:
a. the economic, environmental and social performance of an entity.
b. the social value, economic impact and community support provided by an entity.
c. the profitability, sustainability and human relations performance of an entity.

d. the financial, economic and environmental performance and position of an entity.

The rational economic person assumption as it is used in PAT is that:
Select one:
a. all individual action is driven by self-interest and individuals will act in an
opportunistic manner.
b. all action by all individuals is driven by multiple interests in achieving a wide range of
goals.
c. the rational person is concerned only with economic factors and so does not assess
the importance of non-economic impacts on their organisation.

d. individuals are governed by a desire to cooperate in organisations to achieve the

rational allocation of economic resources.
The main benefits of international harmonisation are said to include:

Select one:
a. removing barriers to international capital flows by reducing differences in financial
reporting requirements and so increasing understanding by foreign investors of
Australian reports.
b. reducing the financial reporting costs for Australian multinational companies.
c. increasing the comparability of financial reports prepared in different countries so
that capital ultimately flows to entities that can use it the most productively.

d. all of the given answers.

The key characteristics of an asset as defined in the framework include:

Select one:
a. there must be future economic benefits.
b. all of the given answers.
c. the reporting entity must control the future economic benefits.

d. the asset results from past transactions.

The IASB conceptual framework adopts which approach to determining profits?
Select one:
a. Cash basis approach.
b. Matching principle approach.
c. Revenue/expense approach.

d. Asset/liability approach.
The functioning of the Auditing and Assurance Standards Board is overseen by:

Select one:
a. the Financial Reporting Council.
b. the Australian Accounting Standards Board.
c. the Australian Accounting Research Foundation.

d. the International Accounting Standards Board.

The framework outlines two underlying assumptions of financial statements. These are:

Select one:
a. accrual basis of accounting and going concern assumption.
b. cash basis of accounting and insolvency assumption.
c. fair value basis and insolvency assumption.

d. historical cost accounting and limited life concept.

The class of assets that is to be valued at lower than cost or net realisable value is:
Select one:
a. debtors.
b. self-generating and regenerating assets.
c. non-current assets.

d. inventories.
The Blaxland Ltd filed a lawsuit against D-Mart Machineries for failure to comply with
the specifications of the factory equipment that they ordered and received. The
solicitors for Blaxland Ltd strongly believe that the company will receive $50 000 to $100
000 if they win the case. Which action is consistent with the framework?
Select one:
a. Blaxland Ltd should recognise a receivable of $50 000, a conservative estimate of the
gain.
b. Blaxland Ltd should recognise a receivable of $75 000, the expected value of the gain.
c. Blaxland Ltd should not recognise the receivable because while the solicitor is
expecting to win the case, the receivable cannot be estimated reliably.

d. Blaxland Ltd should not recognise the receivable until it is probable that they have
won the case.
The Australian Accounting Standards Board reports to which body?
Select one:
a. the Financial Accounting Standards Board.
b. the Australian Accounting Standards Review Board.
c. the Financial Reporting Council.

d. the Urgent Issues Group.

The agency relationship:

Select one:
a. can only work if principals are paid a bonus.
b. involves delegating authority.
c. can lead to a loss of efficiency and involves delegating authority.

d. can lead to a loss of efficiency.

The AASB's responsibilities include:
Select one:
a. developing accounting standards that have the force of law under the Corporations
Act.
b. setting ethical guidelines for the accounting profession.
c. formulating standards to be used by the entities in the public sector.

d. developing accounting standards that have the force of law under the Corporations
Act and formulating standards to be used by the entities in the public sector.
Stakeholders are:

Select one:
a. anyone with a direct financial interest in the firm.
b. all of the people included in the given answers.
c. special-interest groups concerned with the environmental actions of the firm.

d. employees.

Some of the perceived barriers to the harmonisation process (for the harmonisation of
accounting standards globally) include:
Select one:
a. different cultures.
b. different business environments.
c. all of the given answers.

d. different legal systems.

Social-responsibility reporting may be seen as having two components:

Select one:
a. environmental reporting and employment reporting.
b. responsibility reporting and societal impact accounting.
c. social reporting and environmental reporting.

d. employment reporting and stakeholder reporting.

Responsibility for the preparation of the financial information of a company rests with:
Select one:
a. the auditors and management jointly.
b. management.
c. the auditors and the board of directors jointly.

d. the auditors.
Research in corporate environmental disclosures show that entities typically disclose
positive environmental information. This would be consistent with:
Select one:
a. Stakeholder Theory.
b. Positive Accounting Theory.
c. Legitimacy Theory.

d. Legitimacy Theory and Positive Accounting Theory.

Positive Accounting Theory seeks to:

Select one:
a. describe how social relationships are implicated in lobbying by interest groups in
accounting standard-setting.
b. explain and predict which accounting methods management is likely to select from
available choices.
c. formulate an understanding of how accountability to a broader set of stakeholders
should be achieved.
d. prescribe which accounting methods should be used in particular circumstances.
Mr and Mrs K Urban are partners in Urban Ltd, a music shop with sales revenue of $5
000 000 per annum, total assets of $10 000 000 and employees totalling 15. Urban Ltd
is:
Select one:
a. not likely to be a reporting entity because it is unlikely to have users dependent on its
financial reports.
b. not a reporting entity because small proprietary companies are frequently not
considered reporting entities.
c. a reporting entity because there are at least two users of a financial report.

d. likely to be a reporting entity because there are two shareholders and it is an exempt
proprietary entity.
Land and buildings may be valued at:
Select one:
a. recoverable amount.
b. opportunity cost.
c. recoverable amount or fair value.

d. fair value.
James Cook Ltd bought a piece of land 10 years ago and the market value of this
property is now worth five times its purchase cost. The accountant suggested that James
Cook Ltd should revalue the asset. This notion is consistent with the qualitative
characteristic of:
Select one:
a. understandability.
b. faithful representation.
c. comparability.

d. relevance.
Firms are subject to political costs when:

Select one:
a. they are highly visible, in the media or other arenas, often as a result of high profits.
b. they record high profits and share those profits in the form of increased wages.
c. they choose accounting policies that best reflect the performance of the firm.

d. they are quite small and have little political influence.

Financial institutions dealing with investments and other financial instruments prefer
which method of measurement for that class of assets?
Select one:
a. Net realisable value.
b. Fair value.
c. Historical cost.

d. Present value.
Criticisms of PAT include:

Select one:
a. it is not value-free as it is claimed.
b. it does not provide a means of improving accounting practice.
c. all of the given answers.

d. it is scientifically flawed since its hypotheses are frequently not supported by
research.
Capture Theory may be described as taking the perspective that:

Select one:
a. the regulated interest is controlled by the regulation agency that generates the
regulations.
b. stakeholders compete to influence the entity in which they have a stake and
management attempts to capture that influence through voluntary disclosures.
c. the regulated interest controls the regulation and the regulating body.

d. the principal has control over the agent through contracting and monitoring.
ASB are initials that stand for:
Select one:
a. Accounting & Auditing Standards Bureau.
b. Australian Accounting Standards Bureau.
c. Australian Accounting Standards Board.

d. Accounting & Auditing Supervision Board.

An externality can be defined as:
Select one:
a. an impact that a reporting organisation has on parties that are external to the
organisation; parties that typically have no direct relationship with the organisation.
b. an impact that a reporting organisation has on parties that have a direct financial
relationship with the organisation.
c. an impact on the organisation that is not of an economic nature and which is caused
by environmental protection regulations.

d. an impact of an external group or entity on the reporting organisation.

An asset is classified as current when:
Select one:
a. it is expected to be realised or intended for sale or consumption in the entity's normal
operating cycle.
b. all of the given answers are correct.
c. the item is held form trading.

d. it is cash or cash equivalent.

A general purpose financial statements means:
Select one:
a. a financial report intended to meet the information needs of preparers.
b. a financial report intended to meet the information needs of users who are able to
command the preparation of reports to satisfy all of their information needs.
c. a financial report prepared by the company for the needs of any user.

d. a financial report intended to meet the information needs of users who are unable to
command the preparation of special purpose reports.
Advertising costs are not typically capitalised because:

Select one:
a. it is not considered probable that the advertising will generate future economic
benefits.
b. the cost of the advertising is typically greater than the recoverable amount.
c. the advertising cannot be controlled by the entity.

d. the future economic benefits cannot generally be measured reliably.

A central goal in establishing a conceptual framework of accounting will be to obtain
general consensus on:

Select one:
a. the qualitative characteristics that financial information should possess.
b. what the elements of financial reporting are, including agreement on the
characteristics and recognition criteria for assets, liabilities, income, expenses and equity.
c. the scope and objectives of financial reporting.

d. the scope and objectives of financial reporting and the qualitative characteristics that
financial information should possess.
According to the AASB framework an asset should have a number of characteristics,
including:

Select one:
a. the transaction giving rise to the ownership must have already occurred.
b. it must be owned by the entity.
c. the future economic benefits must be very likely to eventuate.

d. it must be expected to provide future economic benefits to the entity.

According to AASB 136, a non-current asset should be:
Select one:
a. revalued downwards where the net amount that is expected to be recovered through
the cash inflows and outflows from its continued use and subsequent disposal exceeds
its cost.
b. written down to its recoverable amount when its carrying amount is greater than its
recoverable amount.
c. revalued upwards where its value in use is greater than its net realisable value.

d. written down to its replacement cost when the recoverable amount is greater than its
value in use.
Jackson Ltd is developing computer software for use in its courier delivery service
business. So far the company had spent $50 000 but the software is still unfinished and
not expected to be finished in time for the preparation of the reports. As a result, the
company had to purchase a computer package amounting to $100 000 to finalise its
accounts. There is no further use for the unfinished software as it is expected that the
purchased computer package could be used by the entity for another 10 years. Which
accounting treatment would be consistent with the framework?
Select one:
a. Recognise an asset of $50 000 and expense of $100 000.
b. Recognise an expense of $150 000.
c. Recognise an asset of $100 000 and expense of $50 000.

d. Recognise an asset of $150 000.