Changes in Estimates Affect Reported Amounts

question 50

Multiple Choice

Changes in estimates affect reported amounts

• A) retrospectively only.
• B) prospectively only.
• C) currently and prospectively.
• D) currently and retrospectively.

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Definitions:

Compound Interest

Interest calculated on the initial principal and also on the accumulated interest of previous periods.

Present Value Methods

Techniques used to determine the current worth of a future cash flow, stream of cash flows, or an investment, by discounting them at a specific rate.

Net Present Value

A financial metric that calculates the value of a project or investment in terms of its present value of net cash inflows minus the present value of its costs.

Cash Payback Period

The length of time it takes for an investment or project to generate enough cash flows to recover its initial cost.