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Chapter 1: Q1ISTQ (page 34)

1. IFRS stands for:

(a) International Federation of Reporting Services.

(b) Independent Financial Reporting Standards.

(c) International Financial Reporting Standards.

(d) Integrated Financial Reporting Services.

Short Answer

Expert verified

Option (c) International financial reporting standards are correct.

Step by step solution

01

Definition of Accounting Standards

Accounting standards can be defined as the common principles and procedures that provide information regarding basic accounting practices. The standards promote comparability and transparency of the financial statement.

02

Explanation for the correct option

The correct option is (c) because the full form of IFRS is International financial reporting standards. These standards reflect the rules and regulations that a business entity must follow while financial reporting to become consistent, comparable, and transparent.

03

Explanation for incorrect options

All other options are incorrect because IFRS does not stand for any of them:

  1. International Federation of reporting services.
  2. Independent financial reporting standards.
  3. Integrated financial reporting services.

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Most popular questions from this chapter

Briefly describe the FASB/ IASB convergence process and the principles that guide their convergence efforts.

Question: Economic consequences of accounting standard-setting means:

(a) standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.

(b) standard-setters must ensure that no new costs are incurred when a new standard is issued.

(c) the objective of financial reporting should be politically motivated to ensure acceptance by the general public.

(d) accounting standards can have detrimental impacts on the wealth levels of the providers of financial information

Presented below are three models for setting GAAP.

  1. The purely political approach, where national legislative action decrees GAAP.
  2. The private, professional approach, where GAAP is set and enforced by private professional actions only.
  3. The public/ private mixed approach, where GAAP is basically set by private-sector bodies that behave as though they were public agencies and whose standards to a great extent are enforced through governmental agencies.

Instructions

  1. Which of these three models best describes standard-setting in the United States? Provide justification for your answer.
  2. Why do companies, financial analysts, labor unions, industry trade associations, and others take such an active interest in standard-setting?
  3. Cite an example of a group other than the FASB that attempts to establish accounting standards. Speculate as to why another group might wish to set its own standards.

The following comments were made at an Annual Conference of the Financial Executives Institutes (FEI). There is an irreversible movement toward the harmonization of financial reporting throughout the world. The international capital markets require an end to:

  1. The confusion caused by international companies announcing different results depending on the set of accounting standards applied.
  2. Companies in some countries obtaining unfair commercial advantages from the use of particular national accounting standards.
  3. The complications in negotiating commercial arrangements for international joint ventures caused by different accounting requirements.
  4. The inefficiency of international companies having to understand and use a myriad of different accounting standards depending on the countries in which they operate and the countries in which they raise capital and debt. Executive talent is wasted on keeping up to date with numerous sets of accounting standards and the never-ending changes to them.
  5. The inefficiency of investment managers, bankers, and financial analysts as they seek to compare financial reporting drawn up in accordance with different sets of accounting standards.

Instructions

  1. What is the International Accounting Standards Board?
  2. What stakeholders might benefit from the use of International Accounting Standards?
  3. What do you believe are some of the major obstacles to convergence?

Some individuals have indicated that the FASB must be cognizant of the economic consequences of its pronouncements. What is meant by 鈥渆conomic consequences鈥�? What dangers exist if politics play too much of role in the development of GAAP?
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