It Was Argued That the Old Version of AASB 1023

question 7

Multiple Choice

It was argued that the old version of AASB 1023 would inappropriately increase the volatility in earnings through:

• A) Its requirement to recognise short-term changes in the net market value of investments in the income statement regardless of whether or not management intends to hold the investments long term.
• B) The failure to net reinsurance reimbursements from claims so that a higher level of claims is reflected in the income statement despite the fact that management has mitigated against this.
• C) The failure to recognise the value of intangible assets such as client lists that contribute to a steady flow of income for an insurer.
• D) The failure to net reinsurance reimbursements from claims so that a higher level of claims is reflected in the income statement despite the fact that management has mitigated against this and the failure to recognise the value of intangible assets such as client lists that contribute to a steady flow of income for an insurer.
• E) None of the given answers.

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Definitions:

Evaluation

The systematic assessment of the value, performance, or quality of a plan or entity.

Straight-line Depreciation

A technique for distributing the expense of a physical asset uniformly throughout its estimated useful duration.

Annual Net Income

The total earnings of a company after all expenses and taxes have been deducted from revenue in a fiscal year.

Tax Rate

The segment of an individual's or corporate's earnings or profits that is taxed.