Question 1

Non-counterbalancing errors are those that longer than two periods to correct themselves.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is (are)  the proper time period(s)  to record the effects of a change in accounting estimate?

Accepted Answer

A)  Current period and prospectively
B)  Current period and retrospectively
C)  Retrospectively only
D)  Current period onlyE) All of the above
F) A) and B)

Question 3

If a particular transaction is not specifically addressed by IFRS, where should an accountant turn to find a hierarchy of guidance to be considered in the selection of an accounting policy?

Accepted Answer

A)  accounting standards from other countries
B)  IAS 8
C)  the company's board of directors
D)  the company's external auditorsE) A) and D)
F) All of the above B

Question 4

Which of the following is accounted for as a change in accounting policy?

Accepted Answer

A)  A change in the estimated useful life of plant assets.
B)  A change from the cash basis of accounting to the accrual basis of accounting.
C)  A change from expensing immaterial expenditures to deferring and amortizing them as they become material.
D)  A change in inventory valuation from average cost to FIFO.E) None of the above
F) B) and C)

Question 5

Why does IASB prohibit retrospective treatment of changes in accounting estimates?

Accepted Answer

A)  The IASB view changes in estimates as normal recurring corrections and adjustments, which are the natural result of the accounting process.
B)  The IASB does not allow the retrospective treatment for any type of presentation.
C)  The IASB prohibits retrospective treatment of changes in accounting estimates because IFRS requires it.
D)  IASB does not prohibit retrospective treatment of changes in accounting estimates, but is silent on this issueE) A) and C)
F) B) and D)

Question 6

Accounting changes are often made and the monetary impact is reflected in the financial statements of a company even though, in theory, this may be a violation of the accounting concept of

Accepted Answer

A)  materiality.
B)  consistency.
C)  prudence.
D)  objectivity.E) A) and D)
F) All of the above

Question 7

Counterbalancing errors are those that will be offset and that take longer than two periods to correct themselves.

Accepted Answer

A) True 
 B)False  False

Question 8

One of the disclosure requirements for a change in accounting policy is to show the cumulative effect of the change on retained earnings as of the beginning of the earliest period presented.

Accepted Answer

A) True 
 B)False

Question 9

The accounting for change in estimates differs between U.S.GAAP and IFRS.

Accepted Answer

A) True 
 B)False

Question 10

Counterbalancing errors do not include

Accepted Answer

A)  errors that correct themselves in two years.
B)  errors that correct themselves in three years.
C)  an understatement of purchases.
D)  an overstatement of unearned revenue.E) C) and D)
F) B) and D)

Question 11

All of the following statements are true regarding IASB's guideline that companies must demonstrate change in accounting policy as preferable or as an improvement, except

Accepted Answer

A)  Diversity in situations and characteristics of the items encountered in practice require the use of professional judgment.
B)  Changes in accounting policy are appropriate only when a company demonstrates that the newly adopted generally accepted accounting policy is more relevant and reliable than the existing one.
C)  Changes in accounting policy are appropriate only when a company demonstrates an improved income tax effect alone.
D)  All of these statements are true.E) A) and D)
F) B) and D)

Question 12

The IASB has declared, as part of its conceptual framework, that it will assess the merits of proposed standards

Accepted Answer

A)  from a position of neutrality.
B)  from a position of materiality.
C)  based on the possible impact on behavior.
D)  based on lobbyist arguments.E) B) and D)
F) B) and C)

Question 13

Under IFRS, when a company prepares financial statements on a new basis, how many years of comparative data are reported?

Accepted Answer

A)  One
B)  Two
C)  Three
D)  FiveE) A) and C)
F) A) and D)

Question 14

When a company changes an accounting policy, it should report the change by reporting the cumulative effect of the change in the current year's income statement.

Accepted Answer

A) True 
 B)False

Question 15

Accounting errors include changes in estimates that occur because a company acquires more experience, or as it obtains additional information.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true regarding whether IFRS specifically addresses the accounting and reporting for effects of changes in accounting policies?

Accepted Answer

A

Question 17

The estimated life of a building that has been depreciated 30 years of an originally estimated life of 50 years has been revised to a remaining life of 10 years.Based on this information, the accountant should

Accepted Answer

A)  continue to depreciate the building over the original 50-year life.
B)  depreciate the remaining book value over the remaining life of the asset.
C)  adjust accumulated depreciation to its appropriate balance, through net income, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years.
D)  adjust accumulated depreciation to its appropriate balance through retained earnings, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years.E) A) and D)
F) A) and B)

Question 18

Retrospective application refers to the application of a different accounting policy to recast previously issued financial statements-as if the new policy had always been used.

Accepted Answer

A) True 
 B)False

Question 19

The IASB is silent on the application of the direct effects of a change in accounting policy.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is correct?

Accepted Answer

A)  Changes in accounting policy are always handled in the current or prospective period.
B)  Prior statements should be restated for changes in accounting estimates.
C)  A change from expensing certain costs to capitalizing these costs due to a change in the period benefited, should be handled as a change in accounting estimate.
D)  Correction of an error related to a prior period should be considered as an adjustment to current year net income.E) A) and B)
F) All of the above

Exam 22: Accounting Changes and Error Analysis

Non-counterbalancing errors are those that longer than two periods to correct themselves.

Correct AnswerverifiedShow Answer

Which of the following is (are) the proper time period(s) to record the effects of a change in accounting estimate?

Correct AnswerverifiedShow Answer

If a particular transaction is not specifically addressed by IFRS, where should an accountant turn to find a hierarchy of guidance to be considered in the selection of an accounting policy?

Correct AnswerverifiedB

Which of the following is accounted for as a change in accounting policy?

Correct AnswerverifiedShow Answer

Why does IASB prohibit retrospective treatment of changes in accounting estimates?

Correct AnswerverifiedShow Answer

Accounting changes are often made and the monetary impact is reflected in the financial statements of a company even though, in theory, this may be a violation of the accounting concept of

Correct AnswerverifiedShow Answer

Counterbalancing errors are those that will be offset and that take longer than two periods to correct themselves.

Correct AnswerverifiedFalse

One of the disclosure requirements for a change in accounting policy is to show the cumulative effect of the change on retained earnings as of the beginning of the earliest period presented.

Correct AnswerverifiedShow Answer

The accounting for change in estimates differs between U.S.GAAP and IFRS.

Correct AnswerverifiedShow Answer

Counterbalancing errors do not include

Correct AnswerverifiedShow Answer

All of the following statements are true regarding IASB's guideline that companies must demonstrate change in accounting policy as preferable or as an improvement, except

Correct AnswerverifiedShow Answer

The IASB has declared, as part of its conceptual framework, that it will assess the merits of proposed standards

Correct AnswerverifiedShow Answer

Under IFRS, when a company prepares financial statements on a new basis, how many years of comparative data are reported?

Correct AnswerverifiedShow Answer

When a company changes an accounting policy, it should report the change by reporting the cumulative effect of the change in the current year's income statement.

Correct AnswerverifiedShow Answer

Accounting errors include changes in estimates that occur because a company acquires more experience, or as it obtains additional information.

Correct AnswerverifiedShow Answer

Which of the following is true regarding whether IFRS specifically addresses the accounting and reporting for effects of changes in accounting policies?

Correct AnswerverifiedA

The estimated life of a building that has been depreciated 30 years of an originally estimated life of 50 years has been revised to a remaining life of 10 years.Based on this information, the accountant should

Correct AnswerverifiedShow Answer

Retrospective application refers to the application of a different accounting policy to recast previously issued financial statements-as if the new policy had always been used.

Correct AnswerverifiedShow Answer

The IASB is silent on the application of the direct effects of a change in accounting policy.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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B

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False

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A

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