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Test Bank For Intermediate Accounting, Volume 1 & 2, 12th Canadian Edition, Donald E. Kieso, ISBN: 1119496330, ISBN: 9781119496335
Test Bank For Intermediate Accounting, Volume 1 & 2, 12th Canadian Edition, Donald E. Kieso, ISBN: 1119496330, ISBN: 9781119496335
Kieso,
2. Explain the need for accounting standards and identify the major entities that influence standard
setting and financial reporting. The accounting profession has tried to develop a set of standards
that is generally accepted and universally practised. This is known as GAAP (generally accepted
accounting principles). Without this set of standards, each enterprise would have to develop its own
standards, and readers of financial statements would have to become familiar with every company’s
particular accounting and reporting practices. As a result, it would be almost impossible to prepare
statements that could be compared. In addition, accounting standards help deal with the information
asymmetry problem.
The Canadian Accounting Standards Board (AcSB) is the main standard-setting body in Canada for
private companies, pension plans, and not-for-profit entities. Its mandate comes from the Canada
Business Corporations Act and Regulations as well as provincial acts of incorporation. For public
companies, GAAP is International Financial Reporting Standards (IFRS) as established by the
International Accounting Standards Board (IASB). Public companies are required to follow GAAP in
order to access capital markets, which are monitored by provincial securities commissions. The
Financial Accounting Standards Board (FASB) is also important as it influences IFRS standard setting.
Private companies may choose to follow IFRS. Public companies that list on U.S. stock exchanges may
choose to follow U.S. GAAP.
3. Explain the meaning of generally accepted accounting principles (GAAP) and the significance of
professional judgement in applying GAAP. Generally accepted accounting principles are either
principles that have substantial authoritative support, such as the CPA Canada Handbook, or those
arrived at through the use of professional judgement and the conceptual framework.
Professional judgement plays an important role in Accounting Standards for Private Enterprises
(ASPE) and IFRS since much of GAAP is based on general principles, which need to be interpreted.
4. Discuss some of the challenges and opportunities for accounting. Some of the challenges facing
accounting are oversight in the capital markets, centrality of ethics, standard setting in a political
environment, principles- versus rules-based standard setting, the impact of technology, and
integrated reporting. All of these require the accounting profession to continue to strive for excellence
and to understand how accounting adds value in the capital marketplace.
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Copyright © 2019 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
Test Bank for Intermediate Accounting, Twelfth Canadian Edition
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Copyright © 2019 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
Test Bank for Intermediate Accounting, Twelfth Canadian Edition
EXERCISES
Item Description
E1-45 Effective capital allocation
E1-46 Financial statements in practice and theory
E1-47 Stakeholders in the financial reporting environment
E1-48 Sources of capital and stages of company growth
E1-49 Objectives of financial reporting
E1-50 Traditional users vs. others
E1-51 Imperfection of the stakeholder ecosystem
E1-52 Entity vs. proprietary perspective
E1-53 User needs
E1-54 The decision-usefulness approach to financial reporting
E1-55 Merits of accrual- vs. cash-basis accounting
E1-56 Information asymmetry
E1-57 Maintaining competitive advantage
E1-58 Management bias in financial statement presentation
E1-59 Financial versus managerial accounting
E1-60 Role of securities commissions and stock exchanges
E1-61 Standard setting
E1-62 Purpose of accounting standards
E1-63 ASPE vs. IFRS
E1-64 IFRS Discussion Group
E1-65 Sources of GAAP
E1-66 Sources of GAAP
E1-67 Professional judgement
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Copyright © 2019 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
Test Bank for Intermediate Accounting, Twelfth Canadian Edition
PROBLEMS
Item Description
P1-75 U.S. GAAP impact on Canadian GAAP
P1-76 Shortcomings of rules-based approach
MULTIPLE CHOICE
Answer: d
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Communication
Answer: a
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
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Copyright © 2019 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
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