Intermediate Accounting Volume 1, 13th Canadian Edition by Donald E. Kieso Test bank

 
Solution 1-73
Technology impacts the process of identifying, measuring, and communicating useful information to users in profound ways. Information is increasingly abundant and available through technology. Trends including digitization, digitalization and artificial intelligence have been accelerating at an exponential pace. This is also a significant increase in the volume of information available (big data). For accountants this means more information on which to base decisions. However, this also creates some important questions related to the use of this data. How reliable is the information? How much information is needed to make decisions? What types of data is relevant? The sheer volume of information and the speed at which it accumulates also presents challenges. A new area of practice is also emerging – data governance. A major challenge for the role of the accountant is to embrace technological opportunities without losing the quality and content or traditional reporting.
 
Difficulty: Hard
Learning Objective: Discuss some of the challenges and opportunities for accounting.
Section Reference: Challenges and Opportunities for the Accounting Profession
CPA: Audit & Assurance
CPA: Communication
CPA: Financial Reporting
CPA: Strategy & Governance
Bloomcode: Evaluation
AACSB: Technology
 
 
Ex. 1-74 Principles versus rules-based approaches
Explain the difference between the principles versus rules-based approaches with regard to GAAP.
 
Solution 1-74
In a rules-based approach—much like the Canadian tax system—there is a rule for most things (even though the rule may be based on a principle). The result is that the body of knowledge in a rules-based approach is significantly larger than that in a principles-based approach.
 
IFRS and ASPE are principles-based. The body of knowledge is smaller and the idea is that one or more principles form the basis for decision-making in many differing scenarios. In addition, professional judgement is fundamental. There is less emphasis on right and wrong answers. Rather, the financial reporting is a result of carefully reasoned application of the principle to the business facts.
 
Difficulty: Easy
Learning Objective: Discuss some of the challenges and opportunities for accounting.
Section Reference: Challenges and Opportunities for the Accounting Profession
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
 
 
Ex. 1-75 Value creation
Describe the term “value creation” as defined by CPA Canada. Explain how this supports and expands sustainability reporting. How does this compare to past definitions of value creation?
 
Solution 1-75
CPA Canada defines value creation as the process by which an organization creates the potential for revenue and net income that can be realized in the future and /or future benefits for the organization’s stakeholders. The very definition supports the idea of sustainability of reporting by working towards and embracing positive societal outcomes. In the past, the term value creation was discussed in the context of a shareholder perspective and profitability. This has been expanded to include a much broader definition of a stakeholder, to include all interested parties.
 
Difficulty: Easy
Learning Objective: Discuss some of the challenges and opportunities for accounting.
Section Reference: Challenges and Opportunities for the Accounting Profession
CPA: Financial Reporting
Bloomcode: Comprehension
AACSB: Analytic
 
 
Ex. 1-76 Standard setting in a political environment
Analyze the IASB funding structure. How does the IASB use this to mitigate political influence over international standard setting bodies?
 
Solution 1-76
The IASB follows and applies the following principles in order to mitigate politicization of the standard setting process:

1. Broad-based: It should not rely on one or few sources. This mitigates to risk of one country having undue influence over the process.
2. Compelling: Constituents should not be allowed to benefit from the standards without contributing to the process. This ensures that members cannot be unduly influenced to make to decisions in another party’s best interest.
3. Open-ended: Financial commitments for funding should not be contingent upon any particular outcomes that may infringe upon independence in the standard setting process. This ensures that funding is committed to the process not the outcome.
4. Country-specific: Funding should be shared by major economies on a proportionate basis. This ensures that less wealthy countries are still entitled to participate in the process.