All of the Following Statements Regarding Accounting for Influential Securities

question 35

Multiple Choice

All of the following statements regarding accounting for influential securities under U.S. GAAP and IFRS are true except:

• A) Under the consolidation method, nonintercompany assets and liabilities are combined (eliminating the need for an investment account).
• B) Under the consolidation method, investee and investor revenues and expenses are combined.
• C) Under the equity method, the share of investee's net income is reported in the investor's income in the same period the investee earns that income.
• D) U.S. GAAP companies commonly refer to noncontrolling interests in consolidated subsidiaries as minority interests whereas IFRS companies use noncontrolling interests.
• E) Under the equity method, the investment account equals the acquisition cost plus the share of investee income plus the share of investee dividends.

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Definitions:

Direct Write-off

A method of accounting for bad debts where specific uncollectible accounts receivable are written off against income at the time they become uncollectible.

Bad Debt Expense

The operating expense incurred because of the failure to collect receivables.

Uncollectible

Refers to amounts due to a company that it considers unlikely to be collected from debtors.

Trade Receivables

Sums due to a business from its clients that stem from selling products or services on account.