30 Free Test Bank for Advanced Financial Accounting 6th Canadian Edition by Beechy

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Which of the following financial statements would likely be the most effective in conveying information to users that will help them to predict the long-term future cash flows of the company?

•  A. A classified balance sheet prepared under the accrual basis of accounting
•  B. A proforma cash flow statement showing expected cash flows for the next year
•  C. A multi-step income statement prepared under the accrual basis of accounting
•  D. A cash flow statement showing actual cash flows for the past two year

Which of the following user groups has the most influence on reporting objectives?

•  A. Canada Revenue Agency
•  B. The company's audit committee
•  C. The company's major lenders
•  D. Industry security analysts

How does a company usually take a "big bath" in a loss year?

•  A. Reduces its long-term liabilities
•  B. Expenses as many of its costs as possible
•  C. Recognizes revenue as soon as possible
•  D. Writes-down its assets

How do financial analysts refer to earnings that correspond closely to cash flows?

•  A. Cash flow per share
•  B. High quality earnings
•  C. Earnings determined on a cash basis
•  D. Low quality earnings

For international standards to be applied effectively, a country does not require ________.

•  A. professional financial preparers
•  B. quality auditors
•  C. an independent enforcement agency
•  D. companies with ethical managers

Professional judgement is based on criteria that include certain characteristics of accounting. Which of the following is not one of these characteristics?

•  A. Timeliness
•  B. Relevance
•  C. Efficiency
•  D. Verifiability

Which of the following covenants would not appear in a loan agreement?

•  A. Limits on additional debt
•  B. Dividend payout limitations
•  C. Valuation
•  D. Minimum times-interest-earned ratio

When the International Accounting Standards Board amends a standard, what must a code-law country do to adopt the amendment?

•  A. The country's securities regulators must approve the amendment.
•  B. The country's professional accounting body must approve the amendment.
•  C. The country must pass new legislation to adopt the amendment.
•  D. The country's financial institution regulators must approve the amendment.

Sheng Ltd., a private company, is seeking financing. Why might it be advantageous for Sheng to use IFRS rather than Accounting Standards for Private Enterprises (ASPE.?

•  A. It is less costly for Sheng to prepare IFRS financial statements.
•  B. It will give Sheng the appearance of an international company.
•  C. It will lower Sheng's audit fees.
•  D. It might enable Sheng to negotiate a lower cost of financing.

A company has chosen accounting policies that result in minimizing its net income. Which of the following is not a reason for doing this?

•  A. Income tax deferral
•  B. Performance evaluation
•  C. Discourage new competitors
•  D. For negotiations with unions

Choco Chocolate is the wholly-owned Canadian subsidiary of the Yummy Candy Company, a publicly-traded US company. Which accounting standards must Choco Chocolate comply with?

•  A. IFRS
•  B. Canadian Accounting Standards for Private Enterprises
•  C. US GAAP
•  D. Whatever standards are prescribed by any loan agreements that Choco has with its lending institutions

A company has chosen accounting policies that result in maximizing its net income. Which of the following is not a reason for doing this?

•  A. To comply with loan agreement maintenance tests
•  B. For favourable performance evaluation
•  C. For cash flow prediction
•  D. To attract new investors

In preparing financial statements with cash flow prediction as a major objective, a company should choose an accounting policy that ________.

•  A. allows a cost to be capitalized
•  B. allows a cost to be expensed
•  C. results in income-smoothing
•  D. maximizes net income

Which financial reporting objective is common to both users and preparers of financial statements?

•  A. Cash flow prediction
•  B. Contract compliance
•  C. Income tax deferral
•  D. Net income maximization

Which of the following statements on professional judgment is not true?

•  A. The exercise of professional judgment requires the availability of benchmarks or explicit criteria by which to evaluate alternatives.
•  B. The use of professional judgment represents arbitrary behaviour.
•  C. An auditor must use his or her professional judgment to determine whether management's choices are suitable within the context of the company.
•  D. Applying the mandatory disclosure requirements of the CICA Handbook often involves professional judgment.

Which of the following Canadian accounting standards are not included in the CICA Handbook?

•  A. Publicly accountable enterprises
•  B. Private enterprises
•  C. Not-for-profit organizations
•  D. Government

Both Canada and Japan have adopted IFRS even though the two countries differ in many ways. What is one areas in which the two countries differ?

•  A. Corporate structure
•  B. Issuance of consolidated financial statements
•  C. Use of common law
•  D. Ability to select accounting policies

In the U.S., accounting standards are set by the Financial Accounting Standards Board (FASB.. From which body does FASB derive its authority?

•  A. US government
•  B. American Institute of Certified Public Accountants (AICPA.
•  C. Securities and Exchange Commission (SEC.
•  D. International Accounting Standards Board (IASB.

Which of the following statements about IFRS is true?

•  A. IFRS is more rule-based than pre-IFRS GAAP.
•  B. IFRS reduces the number of management estimates that can be used.
•  C. IFRS requires more judgement in selecting appropriate accounting policies than under pre-IFRS GAAP.
•  D. IFRS does not require as strong an accounting infrastructure as under pre-IFRS GAAP.

Which of the following private companies is required to use IFRS?

•  A. Investment company
•  B. Import/export company
•  C. Manufacturing company
•  D. Accounting firm

What is often the main motivation behind the practice of taking a "big bath" in a loss year?

•  A. To minimize income taxes
•  B. To smooth income
•  C. To maximize asset book values
•  D. To increase future years' earnings

What effect does income smoothing have on risk analysis?

•  A. Reduces the business risk of a company
•  B. Increases the financial risk of a company
•  C. Reduces the audit risk of a company
•  D. Has no effect on risk analysis

What was the main reason for adopting international standards?

•  A. Internationalization of securities markets
•  B. Internationalization of financial markets
•  C. Globalization of business
•  D. Increasing complexity of GAAP

What is one of the main reasons why securities commissions are often ineffective enforcement agencies for accounting standards?

•  A. Lack of knowledge
•  B. Lack of financing
•  C. Lack of independence
•  D. Lack of support from professional accounting bodies

Which financial reporting approach has Canada decided to take with respect to private enterprises?

•  A. IFRS
•  B. Special adaptation of IFRS for small and medium enterprises
•  C. Canadian GAAP for private enterprises
•  D. Disclosed basis of accounting