CPA Exam : Conceptual Framework, Standards, Standard Setting, and Presentation of Financial Statements

Study concepts, example questions & explanations for CPA Exam

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Example Questions

Example Question #1 : Cpa

Which of the following could be considered as enhancing qualitative characteristics of financial reporting?

Possible Answers:

Timeliness

All of these

Verifiability

Understandability 

Comparability

Correct answer:

All of these

Explanation:

Enhancing qualitative characteristics are the attributes that make financial information useful. Qualitative attributes are the non-numerical characteristics that distinguish more useful information from less useful information. All of the following characteristics are considered to be enhancing qualitative characteristics: comparability (i.e. consistency), verifiability, timeliness, and understandability. 

Example Question #2 : Cpa

Which of the following is not an accurate difference between the International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (US GAAP)?

Possible Answers:

The IFRS permits the reevaluation of intangible assets other than goodwill while the US GAAP does not.

The US GAAP uses a principles based approach while the IFRS employs a rules based approach.

None of these

The US GAAP uses a two-step impairment approach while the IFRS uses a one-step approach.

The US GAAP has no requirement regarding comparative information while the IFRS does.

Correct answer:

The US GAAP uses a principles based approach while the IFRS employs a rules based approach.

Explanation:

"The US GAAP uses a principles based approach while the IFRS employs a rules based approach" is the correct answer. This is not an accurate difference between the IFRS and the USGAAP. The US GAAP typically employs a rules based approach while the IFRS follows a principles based approach. The other choices represent accurate differences between the IFRS and US GAAP according to the International Accounting Standards Committee. 

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