A Company Can Change to a New Accounting Principle If

question 91

Multiple Choice

A company can change to a new accounting principle if management can justify that the new principle results in

• A) more relevant and faithful representation of the financial presentation in the statements.
• B) a higher profit.
• C) a lower profit for tax purposes.
• D) less likelihood of clerical errors.

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Definitions:

Wheel Speed Sensor

A sensor used to measure the rotation speed of a vehicle's wheel, crucial for systems like ABS and traction control.

IRR

Internal Rate of Return, a financial metric used to evaluate the profitability of potential investments, representing the discount rate that makes the net present value of cash flows from a particular project equal to zero.

Cash Flows

The sum of all money movements into and out of a corporation, directly impacting its immediate financial health.

Required Rate

The least annual percentage gain that entices investors, be they individuals or companies, into a certain security or project.