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SOLUTION MANUAL FOR
Intermediate Accounting IFRS 4th Edition
by Donald E. Kieso, Jerry J. Weygandt,
Terry D. Warfield
Chapter 1 - 24

,SOLUTION MANUAL FOR
Intermediate Accounting IFRS 4th Edition by Donald E. Kieso, Jerry J.
Weygandt, Terry D. Warfield Chapter 1-24



CHAPTER 1
Financial Reporting and Accounting Standards

ASSIGNMENT CLASSIFICATION TABLE

Topics Questions Concepts for
Analysis

1. Global markets and financial reporting. 1, 2, 3, 4 4

2. Objective of financial reporting. 5, 6, 7, 8, 9, 10 2, 3

3. Standard-setting organizations. 11, 12, 13, 14, 1, 2, 3, 5, 6, 8, 9,
15, 16, 17, 18 11

4. Financial reporting challenges. 19, 20, 21, 22, 3, 7, 8, 10, 11, 12
23, 24, 25
ASSIGNMENT CHARACTERISTICS TABLE

Level of Time
Item Description Difficulty (minutes)

CA1.1 IFRS and standard-setting. Simple 5–10
CA1.2 IFRS and standard-setting. Simple 5–10
CA1.3 Financial reporting and accounting standards. Simple 15–20
CA1.4 Financial accounting. Simple 15–20
CA1.5 Need for IASB. Simple 15–20
CA1.6 IASB role in standard-setting. Simple 15–20
CA1.7 Accounting numbers and the environment. Simple 10–15
CA1.8 Politicalization of IFRS. Complex 15–20
CA1.9 Models for setting IFRS. Simple 10–15
CA1.10 Economic consequences. Moderate 10–15
CA1.11 Rule-making Issues. Complex 20–25
CA1.12 Financial reporting pressures. Moderate 25–35

, ANSWERS TO QUESTIONS

1. World markets are becoming increasingly intertwined. The tremendous variety and volume of both
exported and imported goods indicates the extensive involvement in international trade. As a
result, the move towards adoption of international financial reporting standards has and will
continue in the future.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


2. Financial accounting measures, classifies, and summarizes in report form those activities and that
information which relate to the enterprise as a whole for use by parties both internal and external
to a business enterprise. Managerial accounting also measures, classifies, and summarizes in
report form enterprise activities, but the communication is for the use of internal, managerial
parties, and relates more to subsystems of the entity. Managerial accounting is management
decision-oriented and directed more toward product line, division, and profit center reporting.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


3. Financial statements generally refer to the four basic financial statements: statement of financial
position, statement of comprehensive income (or income statement), statement of cash flows, and
statement of changes in equity. Financial reporting is a broader concept; it includes the basic
financial statements and any other means of communicating financial and economic data to
interested external parties.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


4. If a company‘s financial performance is measured accurately, fairly, and on a timely basis, the right
managers and companies are able to attract investment capital. To provide unreliable and
irrelevant information leads to poor capital allocation which adversely affects the securities market.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


5. A single set of high quality accounting standards ensures adequate comparability. Investors are
able to make better investment decisions if they receive financial information from a U.S. company
that is comparable to an international competitor.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


6. The objective of general-purpose financial reporting is to provide financial information about the
reporting entity that is useful to present and potential equity investors, lenders, and other creditors
in making decisions about providing resources to the entity.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


7. General-purpose financial statements provide financial reporting information to a wide variety of
users. To be cost effective in providing this information, general-purpose financial statements
provide at the least cost the most useful information possible.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


8. Shareholders, creditors, suppliers, employees, and regulators all use general-purpose financial
statements. The primary user group is capital providers (shareholders and creditors).
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


9. The proprietary perspective is not considered appropriate because this perspective generally does
not reflect a realistic view of the financial reporting environment. Instead, the entity perspective
is adopted which is consistent with the present business environment where most companies
engaged in financial reporting have substance separate and distinct from their owners.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication

,Questions Chapter 1 (Continued)

10. This statement is not correct. The objective of financial reporting is primarily to provide information
to investors interested in assessing the company‘s ability to generate net cash inflows and
management‘s ability to protect and enhance the capital providers‘ investments. Financial
reporting should help investors assess the amounts, timing and uncertainty of prospective cash
inflows.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


11. The two organizations involved in international standard-setting are IOSCO (International Organi-
zation of Securities Commissions) and the IASB (International Accounting Standards Board.) The
IOSCO does not set accounting standards, but ensures that the global markets can operate in an
efficient and effective manner. Conversely, the IASB‘s mission is to develop a single set of high
quality, enforceable and global financial reporting standards (IFRSs) for general-purpose financial
statements.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


12. IOSCO (International Organization of Securities Commissions) is an association of organizations
that regulate the world‘s securities markets. Members are generally the main financial regulators
for a given country. IOSCO does not set accounting standards.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


13. The mission of the IASB (International Accounting Standards Board) is to develop, in the public
interest, a single set of high quality, enforceable global international financial reporting standards
(IFRSs) for general-purpose financial statements.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


14. The purpose of the Monitoring Board is to establish a link between accounting standard-setters
and those public authorities (such as IOSCO) that generally oversee accounting standard-setters.
This board also provides political legitimacy to the overall organization.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


15. The IASB preliminary views are based on research and analysis conducted by the IASB staff.
IASB exposure drafts are issued after the Board evaluates research and public response to
preliminary views. IASB standards are issued after the Board evaluates responses to the exposure
draft.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


16. IASB International Financial Reporting Standards are financial accounting standards issued by the
IASB and are referred to as International Financial Reporting Standards (IFRS). The IFRS
Conceptual Framework for Financial Reporting sets forth fundamental objectives and concepts
that the Board uses in developing future standards of financial reporting. The intent of the
Conceptual Framework is to form a cohesive set of interrelated concepts that will serve as tools for
solving existing and emerging problems in a consistent manner.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


17. In ranking from the most authoritative to least authoritative, International Financial Reporting
Standards are the most authoritative, followed by International Financial Reporting Standard
Interpretations and then the Conceptual Framework for Financial Reporting.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication

,Questions Chapter 1 (Continued)

18. The International Financial Reporting Standards Interpretations Committee (IFRIC) applies a
principles-based approach in providing interpretative guidance. The IFRIC issues interpretations
that cover newly identified financial reporting issues not specifically dealt with in IFRS, and issues
where conflicting interpretations have developed, or seem likely to develop in the absence of
authoritative guidance.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


19. Some major challenges facing the accounting profession relate to the following items:
Nonfinancial measurement—how to report significant key performance measurements such as
customer satisfaction indexes, backlog information and reject rates on goods purchased.
Forward-looking information—how to report more future-oriented information.
Soft assets—how to report on intangible assets, such as market know-how, market
dominance, and well-trained employees.
Timeliness—how to report more real-time information.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


20. The sources of pressure are innumerable, but the most intense and continuous pressure to
change or influence the development of IFRS come from individual companies, industry
associations, governmental agencies, practicing accountants, academicians, professional
accounting organizations, and investing public.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


21. Economic consequences means the impact of accounting reports on the wealth positions of
issuers and users of financial information, and the decision-making behavior resulting from that
impact. In other words, accounting information impacts various users in many different ways which
leads to wealth transfers among these various groups.

If politics plays an important role in the development of accounting rules, the rules will be subject
to manipulation for the purpose of furthering whatever policy prevails at the moment. No matter
how well intentioned the rule-maker may be, if information is designed to indicate that investing in
a particular enterprise involves less risk than it actually does, or is designed to encourage invest-
ment in a particular segment of the economy, financial reporting will suffer an irreplaceable loss of
credibility.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


22. No one particular proposal is expected in answer to this question. The students‘ proposals,
however, should be defensible relative to the following criteria:
(1) The method must be efficient, responsive, and expeditious.
(2) The method must be free of bias and be above or insulated from pressure groups.
(3) The method must command widespread support if it does not have legislative authority.
(4) The method must produce sound yet practical accounting principles or standards.
The students‘ proposals might take the form of alterations of the existing methodology, an accoun-
ting court (as proposed by Leonard Spacek), or governmental device.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


23. Concern exists about fraudulent financial reporting because it can undermine the entire financial
reporting process. Failure to provide information to users that is accurate can lead to inappropriate
allocations of resources in our economy. In addition, failure to detect massive fraud can lead to
additional governmental oversight of the accounting profession.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication

,Questions Chapter 1 (Continued)

24. The ―expectations gap‖ is the difference between what people think accountants should be doing
and what accountants think they can do. It is a difficult gap to close. The accounting profession
recognizes it must play an important role in narrowing this gap. To meet the needs of society, the
profession is continuing its efforts in developing accounting standards, such as numerous
pronouncements issued by the IASB, to serve as guidelines for recording and processing business
transactions in the changing economic environment.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


25. Accountants must perceive the moral dimensions of some situations because IFRS does not
define or cover all specific features that are to be reported in financial statements. In these
instances, accountants must choose among alternatives. These accounting choices influence
whether particular stakeholders may be harmed or benefited. Moral decision-making involves
awareness of potential harm or benefit and taking responsibility for the choices.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication




TIME AND PURPOSE OF CONCEPTS FOR ANALYSIS

CA 1.1 (Time 5–10 minutes)
Purpose—to provide the student with an opportunity to answer questions about IFRS and standard-
setting.

CA 1.2 (Time 5–10 minutes)
Purpose—to provide the student with an opportunity to answer questions about IFRS and standard-
setting.

CA 1.3 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to answer questions about financial reporting and
standard-setting.

CA 1.4 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to distinguish between financial accounting and
managerial accounting, identify major financial statements, and differentiate financial statements and
financial reporting.

CA 1.5 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to evaluate the viewpoint of removing mandatory
accounting rules and allowing each company to voluntarily disclose the information it desired.

CA 1.6 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to identify the sponsoring organization of the IASB,
the method by which the IASB arrives at a decision, and the types and the purposes of documents
issued by the IASB.

CA 1.7 (Time 10–15 minutes)
Purpose—to provide the student with an opportunity to describe how reported accounting numbers
might affect an individual‘s perceptions and actions.

CA 1.8 (Time 15–20 minutes)
Purpose—to provide the student with an opportunity to focus on the types of organizations involved in
the rule making process, what impact accounting has on the environment, and the environment‘s
influence on accounting.

,CA 1.9 (Time 10–15 minutes)
Purpose—to provide the student with an opportunity to focus on what type of rule-making environment
exists. In addition, this CA explores why user groups are interested in the nature of IFRS and why some
groups wish to issue their own rules.

CA 1.10 (Time 10–15 minutes)
Purpose—to provide the student with the opportunity to discuss the role of government officials in
accounting rule-making.

CA 1.11 (Time 20–25 minutes)
Purpose—to provide the student with an opportunity to consider the ethical dimensions of
implementation of a new accounting pronouncement.

CA 1.12 (Time 25–35 minutes)
Purpose—to provide the student with a writing assignment concerning the ethical issues related to
meeting earnings targets.
SOLUTIONS TO CONCEPTS FOR ANALYSIS

CA 1.1
1. True.

2. False. Any company claiming compliance with IFRS must comply with all standards and inter-
pretations, including disclosure requirements.

3. False. The IFRS advisory council provides advice and counsel to the IASB on major policies and
technical issues. It is not a governmental body.

4. True.

5. False. The IASB has no government mandate and does follow a due process in issuing IFRS.
LO: 3, Bloom: K, Difficulty: Simple, Time: 5-10, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication




CA 1.2
1. False. The objective emphasizes an entity perspective, not a stewardship approach.

2. False. The objective of financial reporting is to provide financial information about the reporting
entity that is useful to present and potential equity investors, lenders, and other creditors in making
decisions in their capacity as capital providers, not preparing the financial statements.

3. False. International Accounting Standards were issued by the International Accounting Standards
Committee while International Financial Reporting Standards are issued by the IASB. Both have
authoritative support.

4. True.
LO: 2,3, Bloom: K, Difficulty: Simple, Time: 5-10, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication




CA 1.3
1. c. 2. d. 3. c. 4. d. 5. b. 6. a. 7. a. 8. b. 9. d. 10. b.
LO: 2,3, Bloom: K, Difficulty: Simple, Time: 15-20, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication

,CA 1.4
(a) Financial accounting is the process that culminates in the preparation of financial reports relative
to the enterprise as a whole for use by parties both internal and external to the enterprise. In
contrast, managerial accounting is the process of identification, measurement, analysis, and
communication of financial information used by the management to plan, evaluate, and control
within an organization and to assure appropriate use of, and accountability for, its resources.

(b) The financial statements most frequently provided are the statement of financial position, the
statement of comprehensive income (or income statement), the statement of cash flows, and the
statement of changes in equity.

CA 1.4 (Continued)
(c) Financial statements are the principal means through which financial information is communicated
to those outside an enterprise. As indicated in (b), there are four major financial statements.
However, some financial information is better provided, or can be provided only, by means of
financial reporting other than formal financial statements. Financial reporting (other than financial
statements and related notes) may take various forms. Examples include the company president‘s
letter or supplementary schedules in the corporate annual reports, prospectuses, reports filed with
govern-ment agencies, news releases, management‘s forecasts, and descriptions of an
enterprise‘s social or environmental impact.
LO: 1, Bloom: K, Difficulty: Simple, Time: 15-20, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication




CA 1.5
It is not appropriate to abandon mandatory accounting rules and allow each company to voluntarily
disclose the type of information it considered important. Without a coherent body of accounting theory
and standards, each accountant or enterprise would have to develop its own theory structure and set of
practices, and readers of financial statements would have to familiarize themselves with every
company‘s peculiar accounting and reporting practices. As a result, it would be almost impossible to
prepare statements that could be compared.

In addition, voluntary disclosure may not be an efficient way of disseminating information. A company is
likely to disclose less information if it has the discretion to do so. Thus, the company can reduce its cost
of assembling and disseminating information. However, an investor wishing additional information has
to pay to receive additional information desired. Different investors may be interested in different types
of information. Since the company may not be equipped to provide the requested information, it would
have to spend additional resources to fulfill such needs; or the company may refuse to furnish such
information if it‘s too costly to do so. As a result, investors may not get the desired information or they
may have to pay a significant amount of money for it. Furthermore, redundancy in gathering and
distributing information occurs when different investors ask for the same information at different points
in time. To the society as a whole, this would not be an efficient way of utilizing resources.
LO: 3, Bloom: AP, Difficulty: Simple, Time: 15-20, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication




CA 1.6
(a) The International Financial Reporting Standards Committee Foundation (The Foundation) is the
sponsoring organization of the IASB. The Foundation selects the members of the IASB and the
Advisory Council, funds their activities, and generally oversees the IASB‘s activities.

, The IASB follows a due process in establishing a typical International Financial Reporting
Standard. The following steps are usually taken: (1) A topic or project is identified and placed on
the Board‘s agenda. (2) Research and analysis are conducted by the IASB and a preliminary
views document is drafted and released. (3) A public hearing is often held. (4) The Board analyzes
and evaluates the public response and issues an exposure draft. (5) The Board studies the
exposure draft in relation to the public responses, revises the draft if necessary, gives the revised
draft final consideration and votes on issuance of an IFRS. The passage of a new accounting
standard in the form of an IASB Standard requires the support of eight of the fourteen Board
members.

(b) The IASB issues three major types of pronouncements: International Financial Reporting
Standards, conceptual framework for financial reporting, and International Financial Reporting
Standards Interpretations. Financial reporting standards issued by the IASB are referred to as
International Financial Reporting Standards (IFRS).
CA 1.6 (Continued)
The International Accounting Standards Committee (IASB predecessor) issued a document
entitled ―Framework for the Preparation and Presentation of Financial Statements.‖ This framework
sets forth fundamental objectives and concepts that the Board uses in developing future standards
of financial reporting. The intent of the document is to form a cohesive set of interrelated concepts,
a conceptual framework, that will serve as tools for solving existing and emerging problems in a
consistent manner.

Interpretations issued by the International Financial Reporting Standards Interpretations
Committee (The Interpretations Committee) are also considered authoritative and cover (1) newly
identified financial reporting issues not specifically dealt with in IFRS, and (2) issues where
unsatisfactory or conflicting interpretations have developed, or seem likely to develop, in the
absence of authoritative guidance.

The Interpretations Committee can address controversial accounting problems as they arise. It
determines whether it can quickly resolve them, or whether to involve the IASB in solving them.
The IASB will hopefully work on more pervasive long-term problems, while the Interpretations
Committee deals with short-term emerging issues.
LO: 3, Bloom: K, Difficulty: Simple, Time: 15-20, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication




CA 1.7
Accounting numbers affect investing decisions. Investors, for example, use the financial statements of
different companies to enhance their understanding of each company‘s financial strength and operating
results. Because these statements follow international accounting standards, investors can make
meaningful comparisons of different financial statements to assist their investment decisions.

Accounting numbers also influence creditors‘ decisions. A commercial bank usually looks into a
company‘s financial statements and past credit history before deciding whether to grant a loan and in
what amount. The financial statements provide a fair picture of the company‘s financial strength (for
example, short-term liquidity and long-term solvency) and operating performance for the current period
and over a period of time. The information is essential for the bank to ensure that the loan is safe and
sound.
LO: 4, Bloom: K, Difficulty: Simple, Time: 10-15, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication




CA 1.8
(a) Arguments for politicalization of the accounting standard-setting process:

, 1. Accounting depends in large part on public confidence for its success. Consequently, the
critical issues are not solely technical, so all those having a bona fide interest in the output of
accounting should have some influence on that output.
2. There are numerous conflicts between the various interest groups. In the face of this, compro-
mise is necessary, particularly since the critical issues in accounting are value judgments, not
the type which are solvable, as we have traditionally assumed, using deterministic models.
Only in this way (reasonable compromise) will the financial community have confidence in the
fairness and objectivity of accounting standard-setting.
3. Over the years, accountants have been unable to establish, on the basis of technical accoun-
ting elements, standards which would bring about the desired uniformity and acceptability. This
inability itself indicates standard-setting is primarily consensual in nature.
CA 1.8 (Continued)
4. The public accounting profession made rules which business enterprises and individuals
―had‖ to follow. For many years, these businesses and individuals had little say as to what the
standards would be, in spite of the fact that their economic well-being was influenced to a
substantial degree by those standards. It is only natural that they would try to influence or
control the factors that determine their economic well-being.

(b) Arguments against the politicization of the accounting standard-setting process:
1. Many accountants feel that accounting is primarily technical in nature. Consequently, they feel
that substantive, basic research by objective, independent and fair-minded researchers
ultimately will result in the best solutions to critical issues, such as the concepts of income and
capital, even if it is accepted that there isn‘t necessarily a single ―right‖ solution.
2. Even if it is accepted that there are no ―absolute truths‖ as far as critical issues are concerned,
many feel that professional accountants, taking into account the diverse interests of the
various groups using accounting information, are in the best position, because of their
independence, education, training, and objectivity, to decide what international financial
reporting standards ought to be.
3. The complex situations that arise in the business world require that trained accountants
develop the appropriate reporting standards.
4. The use of consensus to develop reporting standards would decrease the professional status
of the accountant.
5. This approach would lead to ―lobbying‖ by various parties to influence the establishment of
reporting standards.
LO: 3, 4, Bloom: K, Difficulty: Complex, Time: 15-20, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication


CA 1.9
(a) Most believe the IASB process is a public private mixed approach. In many respects, the IASB is a
quasi-governmental agency in that its pronouncements are required to be followed in some
jurisdictions. For example, all public European companies are required to use IASB standards
when preparing financial statements. In fact, both the FASB and the IASB believe that IFRS has
the best potential to provide a common platform on which companies can report and investors can
compare financial information. The purely political approach is used in France and West Germany.
The private, professional approach is employed in Australia, Canada, and the United Kingdom.

(b) Publicly reported accounting numbers influence the distribution of scarce resources. Resources
are channeled where needed at returns commensurate with perceived risk. Thus, reported
accounting numbers have economic effects in that resources are transferred among entities and
individuals as a consequence of these numbers. It is not surprising then that individuals affected
by these numbers will be extremely interested in any proposed changes in the financial reporting
environment.
LO: 3, Bloom: K, Difficulty: Simple, Time: 10-15, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication

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Rockwell Practice Midterm –exam 2023 with 100% correct answers

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