Theories Of Financial Accounting

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Question 1
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The Conceptual Framework can be described as a positive theory of accounting.

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Question 2
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In the decade leading up to the 1970s the notable theories being developed were predominantly normative in nature.

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Question 3
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Normative theories are referred to as prescriptive theories.

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Question 4
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PAT outlines the best (or most positive)way of preparing accounting reports.

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Question 5
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PAT assumes that managers will adopt accounting methods that benefit themselves ahead of the entity.

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Question 6
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Information asymmetry is the situation in which the agent has access to information not available to the principal.

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Question 7
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Theorists' own values or ideological predispositions may be among the factors that determine which side of the argument they will adopt in respect to disputable connections in a theory with evidence.

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Question 8
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Creative accounting describes the actions of report preparers who select accounting methods that best reflect the performance of the firm.

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Question 9
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According to Chambers' CoCoA model,if assets cannot be sold separately they should be deemed to have no value.

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Question 10
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An example of a theory that adopts a systems-oriented perspective is Legacy Theory.

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Question 11
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IAS 1 requires the summary of accounting policies adopted by reporting entities to be presented in any section of the notes to the financial report.

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Question 12
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PAT suggests that agents agree to bonding and monitoring mechanisms to avoid price protection by principals.

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Question 13
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Creative accounting violates IFRS standards and generally accepted accounting principles.

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Question 14
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Fair value accounting is an example of positive accounting theory.

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Question 15
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Corporate social responsibility reporting is consistent with stakeholder theory.

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Question 16
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The ethical perspective of stakeholder theory is consistent with the efficiency view in Positive Accounting Theory.

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Question 17
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Regulation is deemed to be an instrument for creating confidence in the capital markets.

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Question 18
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Income-decreasing accounting methods may be adopted if a firm believes it might be subject to political costs.

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Question 19
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Positive Accounting Theory seeks to:

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A
prescribe which accounting methods should be used in particular circumstances.
B
explain and predict which accounting methods management is likely to select from available choices.
C
describe how social relationships are implicated in lobbying by interest groups in accounting standard setting.
D
formulate an understanding of how accountability to a broader set of stakeholders should be achieved.
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Question 20
Multiple Choice

An empirically based theory could be described as being:

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A
developed and supported on the basis of observations.
B
based on a set of accepted scales and measures.
C
based on a political approach developed in the early nation states.
D
related to a specific time period and not able to be generalised.
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