✏️ Chapter 1

not large enough to affect economic

decision.
Notes that are not included in the 2022
edition Another example of the application of

📌 Move towards IFRS materiality is the common practice of

The Philippines is fully compliant with
IFRS effective January 2005, a
process which was started back in
1997 in moving from USA GAAP to
IFRS.
large entities of rounding amounts to
the nearest thousand pesos in their
financial statements.
Small entities may round off to the
nearest peso.

The following factors are considered in

deciding to move totally to
international accounting standards:

a. Support of international accounting

standards by Philippine organizations,
such as the Philippine SEC, Board of
Accountancy, and PICPA.

b. Increasing internalization of
business which has heightened interest
in a common language for financial
reporting.

c. Improvement of international
accounting standards or removal of
free choices of accounting treatments.

d. Increasing recognition of
international accounting standards by
the World Bank, Asian Development
Bank, and World Trade Organization.

✏️ Chapter 3
Notes that are not included in the 2022
edition

🔎 When is an item material?

For example, small expenditures for
tools are often expensed immediately
rather than depreciated over their
useful lives to save on clerical costs of
recording depreciation because the
effect on the financial statements is
✒️ Problem 2-1
Multiple choice (IFRS)
 opportunities and risks.
1. Which statement is true about the
Conceptual Framework for Financial
Reporting?
a. The Conceptual Framework is not a
Standard.
b. The Conceptual Framework describes
the concepts for general purpose
financial reporting.
c. In case of conflict, the requirements of
the IFRS prevail over the Conceptual
Framework.
d. All of these statements are true about
the Conceptual Framework.
2. Which is not a purpose of the
Revised Conceptual Framework?
a. To assist the IASB to develop IFRS
based on consistent concepts.
b. To assist preparers to develop
consistent accounting policy when no
Standard applies to a particular
transaction or when Standard allows a
choice of accounting policy.
c. To assist all parties to understand and
interpret the Standards.
d. To assist regulatory agencies in issuing
rules and regulations for a particular
industry.
3. The scope of the Revised
Conceptual Framework comprises
how many chapters?
a. Five
b. Six
c. Seven
d. Eight
4. The Conceptual Framework
provides the foundation for
Standards that
a. Contribute to transparency by
enhancing international comparability
and quality of financial information.
b. Strengthen accountability of
management.
c. Contribute to economic efficiency by
helping investors to identify
d. All of these are the result of Standards
developed based on consistent
concepts.
✒️ Problem 2-2
Multiple choice (IAA)

1. What is the authoritative status of
the Conceptual Framework?
a. The Conceptual Framework has the
highest level of authority.
b. In the absence of a standard or an
interpretation that specifically applies to
a transaction, the Conceptual
Framework shall be followed.
c. In the absence of a standard or an
interpretation that specifically applies to
a transaction, management shall
consider the applicability of the
Conceptual Framework in developing
and applying an accounting policy that
results in information that is relevant
and faithfully represented.
d. The Conceptual Framework applies
only when the LASB develops new
standards.
2. The Conceptual Framework is
intended to establish
a. GAAP in financial reporting.
b. The meaning of "present fairly in
accordance with GAAP".
c. The objectives and concepts for use in
developing standards of financial
accounting and reporting. d. The
hierarchy of sources of GAAP.
3. A Conceptual Framework should
a. Lead to uniformity of financial
statements.
b. Eliminate alternative accounting
principles.
c. Guide multinational entities in
developing generally accepted auditing
standards.
d. Define the basic objectives, terms and
concepts of accounting.

4. Which is not a purpose of the
Conceptual Framework?
a. To provide definitions of key terms and
fundamental concepts.
b. To provide specific guidelines for
resolving situations not covered by
existing accounting standards.
c. To assist accountants in selecting
among alternative accounting and
reporting methods.
d. To assist the International Accounting
Standards Board in the
standard-setting process.
✒️ Problem 2-3
Multiple choice (ICP)
 more quickly.
1. In the Conceptual Framework for
Financial Reporting, what provides
the "why" of accounting?
a. Measurement and recognition concept
b. Qualitative characteristic of accounting
information
c. Element of financial statement
d. Objective of financial reporting
2. The underlying theme of the
Conceptual Framework is
a. Decision usefulness
b. Understandability
c. Timeliness
d. Comparability
3. The objective of financial reporting
a. Is the foundation for the Conceptual
Framework
b. Includes the qualitative characteristics
of useful information
c. Is not found in the Conceptual
Framework
d. All of these are correct choices
regarding the objective of financial
reporting
4. Which of the following is not a
benefit associated with the
Conceptual Framework?
a. A Conceptual Framework should
increase users' understanding and
confidence in financial reporting.
b. Practical problems should be more
quickly solvable.
c. A coherent set of accounting standards
should result.
d. Business entities will need far less
assistance from accountants.

5. Which statement is not true
concerning the Conceptual
Framework?
a. The Conceptual Framework should be
a basis for standard setting.
b. The Conceptual Framework should
allow practical problems to be solved
c. The Conceptual Framework should be
based on fundamental truth derived
from the law of nature.
d. The Conceptual Framework should
increase users' understanding and
confidence in financial reporting.
✒️ Problem 2-4
Multiple choice (IAA)

1. Users of financial reports include
which of the following?
a. Creditors
b. Creditors and government agencies
c. Creditors and unions
d. Creditors, government agencies and
unions
2. The primary users of financial
information include
a. Existing and potential investors
b. Existing and potential lenders and
other creditors
c. User group such as employees,
customers, governments and their
agencies, and the public
d. Existing and potential investors,
lenders and other creditors
3. Which group is not among the
external users for whom financial
statements are prepared?
a. Customers
b. Suppliers
c. Employees
d. All of these are external users of
financial statements
4. Which of the following is an internal
user of financial information?
a. Board of Directors
b. Shareholder
c. Holder of bonds
d. Creditor with long-term contract
5. These users require information on
risk and return provided by their
investment.
a. Investors
b. Employees
c. Lenders
d. Customers

6. These users are interested in
information about the profitability
and stability of the entity in order to
assess the ability of entity to
provide remuneration, retirement
benefits and employment
opportunities.
a. Customers
b. The public
c. Governments and their agencies
d. Employees
7. These users are interested in
information that enables them to
assess whether their loans, the
related interest thereon, and other
amounts owing to them will be paid
when due.
a. Lenders and other creditors
b. Borrowers
c. Trade creditors
d. Owners
8. These users are interested in
information about the continuance
of an entity, especially when they
have a long-term involvement with
or are dependent on the entity.
a. Customers
b. Employees
c. Trade unions
d. Suppliers
9. These users are interested in
information in order to regulate the
activities of an entity, determine
taxation policies and provide a basis
for national statistics.
a. Governments and their agencies
b. Major organization of users
c. Bureau of Internal Revenue
d. Department of Finance
10. These users need information on
trends and recent developments
where an entity makes a substantial
contribution to the local economy
providing employment and using
local suppliers.
a. The public
b. Governments and their agencies
c. Finance entities
d. Private entities
✒️ Problem 2-5
Multiple choice (IAA)
1. The overall objective of financial
reporting is to provide information
a. That is useful for decision making.
b. About assets, liabilities and equity of
an entity.
c. About financial performance during a
period.
d. That allows owners to assess
management performance.
2. The primary focus of financial
reporting has been on meeting the
needs of which of the following
groups?
a. Management
b. Existing and potential investors,
lenders and other creditors
c. National taxing authorities
d. Independent CPAS
3. The primary objective of financial
reporting is to provide useful
information to
a. Management
b. Capital providers
c. Regulatory body
d. Government
4. Which is an objective of financial
reporting?
a. To provide information that is useful in
making investing and credit decisions.
b. To provide information that is useful to
management.
c. To provide information about the
potential users.
d. To provide information about ways to
solve internal and external conflicts
about the entity.
5. Which is an objective of financial
reporting?
a. To provide information that is useful to
management in making decisions.
b. To provide information that clearly
portrays nonfinancial transactions.
c. To provide information that is useful to
assess the amount, timing, and
uncertainty of prospective cash
receipts.
d. To provide information that excludes
claims against the resources.
6. An objective of financial reporting is
to provide
a. Information about the investors in the
entity.
b. Information about the liquidation value.
c. Information that is useful in assessing
cash flow prospects.
d. Information that will attract new
investors.
7. Assessing cash flow prospects is
interpreted to mean
a. Cash basis accounting is preferred
over accrual basis.
b. Information about the financial effects
of cash receipts and cash payments is
generally considered the best indicator
of ability to generate favorable cash
flows.
c. Over the long run, trends in revenue
and expenses are generally more
meaningful than trends in cash receipts
and disbursements.
d. All of the choices are correct regarding
assessing cash flow prospects.
8. In measuring financial performance,
accrual accounting is used because
a. Cash flows are considered less
important.
b. It provides a better indication of ability
to generate cash flows than cash
basis.
c. It recognizes revenue when cash is
received.
d. It is one of the implicit assumptions.
9. The most useful information in
predicting future cash flows is
a. Information about current cash flows
b. Current earnings based on accrual
accounting
c. Information regarding the accounting
policies used
d. Information regarding the results
obtained by using a wide variety of
accounting policies
10. The accrual basis of accounting is
most useful for
a. Determining the amount of income tax
liability.
b. Predicting the short-term financial
performance.
c. Predicting the long-term financial
performance.
d. Determining the amount of dividends to
be declared.
✒️ Problem 2-6
Multiple choice (AICPA Adapted)
1. The objective of financial reporting
is based on
a. The need for conservatism
b. Reporting on management stewardship
c. Generally accepted accounting
principles
d. The needs of the users of the
information
2. Which statement is not true about
financial reporting?
a. Financial reporting shall provide
information about entity resources,
claims against those resources and
changes in them.
b. Financial reporting shall not provide
information useful in evaluating
management stewardship.
c. Financial reporting shall provide
information useful in investment, credit
and similar decision.
d. Financial reporting shall provide
information useful in assessing cash
flow prospects..
3. Which of the following is not an
objective of financial reporting?
a. To provide information about an entity's
assets and claims against those assets
b. To provide information that is useful in
assessing an entity's sources and uses
of cash
c. To provide information that is useful in
lending and investing decisions
d. To provide information about the
liquidation value of an entity
4. Financial reporting pertains to
information about
a. Individual business entities, rather than
to industries or an economy as a whole
or to members of society as
consumers.
b. Business industries, rather than to
individual entities or an economy as a
whole or to members of society as
consumers.
c. Individual business entities, industries,
and an economy as a whole, rather
than to members of society as
consumers.
d. An economy as a whole and to
members of society as consumers,
rather than to individual entities or
industries.
5. Under the Revised Conceptual
Framework, during a period when an
entity is under the direction of a
particular management, financial
reporting provides information
about
a. Entity performance and management
performance
b. Management performance but not
entity performance
c. Entity performance but not
management performance
d. Neither entity performance nor
management performance.
✒️ Problem 6-6
Multiple choice (Conceptual Framework)
1. Which statement is true about
current value?
a. Fair value of an asset is the price that
would be received to sell an asset in
an orderly transaction between market
participants at the measurement date.
b. Value in use is the present value of the
cash flows expected to be derived from
the use and ultimate disposal of an
asset.
c. Fulfillment value is the present value of
the cash expected to be transferred for
the payment of liability.
d. All of these statements are true about
current value.