Under New Accounting Standards Passed in 2006 Firms Must Report

question 52

Multiple Choice

Under new accounting standards passed in 2006 firms must report changes in accounting principle in the current and prior years as if the new accounting principle had been applied all along.The rationale for this change was:

• A) using the same accounting principle in current and prior periods enhances the information content of reported earnings in forecasting future earnings.
• B) conservatism.
• C) comparability.
• D) materiality.

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Definitions:

Scientific Approach

The scientific approach involves systematic observation, measurement, experiment, formulation, testing, and modification of hypotheses to gain knowledge and understand phenomena.

Acquiring Knowledge

The process of obtaining information and understanding through experiences, education, and study.

Intuition

The ability to understand something instinctively, without the need for conscious reasoning.

Assertions

Statements or claims that are often made without proof or evidence, typically used in argumentation.