If historical cost profits are all distributed in dividends during times of rising inventory prices, this will lead to (assuming other things being equal):
A reduction in financial capital
An erosion of operating capacity
No effect on capital
None of the given options is correct.
Which of the following statements about holding gain (cost savings) in the CCA model is false?
Unrealised savings include gains (cost saving) from holding inventory that has increased in price, which have yet to be realised.
Realised savings relate to cost savings in inventory actually incurred, and gains (cost savings) relate to depreciation actually incurred.
Unrealised savings include gains (cost savings) from holding depreciable assets (with higher replacement costs) not yet realised through the process of depreciation.
All of the given options are correct.
Which of the following characteristics is not included in Continuously Contemporary Accounting (CoCoA), as proposed by Chambers?
It provides information about an entity's capacity to adapt to changing circumstances using its cash and cash equivalents.
All assets are valued in the Balance Sheet based on their exit (net selling) prices.
Profit is defined as the amount that can be distributed while maintaining operating capacity intact.
Unlike CCA, CoCoA does not make a distinction between realised and unrealised gains (cost savings).
Which of the following is not a perceived advantage in developing a conceptual framework project?
Standard-setters will be less accountable for their decisions.
Setting accounting standards will be more economical, despite the resources needed to develop the conceptual framework and standards.
It will result in a reduced number of accounting standards where issues are covered by the conceptual framework.
It will provide a defence and enhance the legitimacy of the accounting profession.
What does the political legitimacy argument, as outlined by Hines (1991), suggest?
The accounting profession consists of experts in technical knowledge of accounting and should therefore be given authority to regulate accounting.
The accounting profession used the development of the conceptual framework as a strategy to promote their self-regulation interests.
The conceptual framework provides the authority to resolve technical issues with authority and legitimacy.
As users are politically involved in developing the conceptual framework, the outcome has political legitimacy.
