Which of the Following Statements Best Describes Considerations Regarding a Company's

question 167

Multiple Choice

Which of the following statements best describes considerations regarding a company's tax expense that may be made by users of GAAP financial statements?

• A)The breakdown of tax expense between current and deferred may provide useful information regarding the comparison of tax burdens between companies.
• B)An analysis of earnings before interest, taxes, depreciation, and amortization (EBITDA) is often a better approach to comparing operating results of two companies.
• C)One-time effects within a company's effective tax rate should be removed before comparing effective tax rates across companies (or across years for the same company).
• D)All the above observations are correct.

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Definitions:

Temporal Method

An accounting technique used to translate the financial statements of a foreign subsidiary to the parent company's currency, using exchange rates that vary with the timing of the original transaction.

Depreciation Expense

An accounting method used to allocate the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Temporal Method

A method of currency translation that uses exchange rates based on the time assets and liabilities were acquired or incurred.

Funds-Flow Statement

A financial statement that shows the inflows and outflows of funds from operations, financing, and investing activities, illuminating how a company's financial position changes over time.