All of the Following Regarding Accounting for Treasury Stock Under

question 93

Multiple Choice

All of the following regarding accounting for Treasury Stock under U.S.GAAP and IFRS is true except:

• A)U.S.GAAP applies the principle that companies do not record gains or losses on transactions involving their own stock.
• B)Only gains are recognized on retirements of treasury stock under IFRS.
• C)IFRS applies the principle that companies do not record gains or losses on transactions involving their own stock.
• D)Gains are not recognized on retirements of treasury stock under U.S.GAAP.
• E)A company's assets and equity are always reduced by the amount paid for the retiring stock.

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Definitions:

Correlation Coefficient

A statistical measure that describes the extent to which two variables fluctuate together, ranging from -1 (perfect negative correlation) to +1 (perfect positive correlation).

Covariance

A measure of the degree to which two variables move in relation to each other, indicating the direction of their relationship.

Expected Return

The anticipated return on an investment, averaging in the probability of different outcomes.

Optimal Risky Portfolio

A portfolio construction that maximizes expected return for a given level of risk, based on modern portfolio theory.