Which of the Following Commitments Would NOT Require Disclosure in the Financial

question 5

Multiple Choice

Which of the following commitments would NOT require disclosure in the financial statement notes?

• A) major property, plant and equipment expenditures
• B) payments under non-cancellable operating leases
• C) large purchases of materials in the normal course of business
• D) commitments involving significant risk

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Definitions:

Unfavorable Variance

A situation where actual costs exceed the standard or budgeted costs, often indicating inefficiencies or increased expenses.

Favorable Variance

A financial term indicating that actual costs were lower or revenues were higher than planned.

Budgeted Amount

The projected costs or revenues allocated to a specific activity or period, based on estimates.

Budget Ratcheting

The practice of setting future budget allocations based on the current period’s expenditures, discouraging under-spending in fear of budget cuts.