If an Accounting Change Has No Material Effect on the Financial

question 63

Multiple Choice

If an accounting change has no material effect on the financial statements in the current year,but the change is reasonably certain to have a material effect in later years,the change should be:

• A)Referred to in the auditor's report for the current year.
• B)Disclosed in the notes to the financial statements of the current year.
• C)Disclosed in the notes to the financial statements and referred to in the auditor's report for the current year.
• D)Treated as a subsequent event.

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Definitions:

Net Present Value

A calculation used to assess the value of future cash flows in today's dollars, considering the time value of money.

Cost of Capital

The cost of funds used for financing a business, typically expressed as an annual percentage, including the cost of equity and debt.

Cash Flows

The total amount of money being transferred into and out of a business, indicating its financial health.

Break-even Quantity

The volume of production or sales at which total costs equal total revenue, meaning there is no net loss or gain.