Explain Why It Is Necessary to Allocate the Preliminary Judgment

question 65

Essay

Explain why it is necessary to allocate the preliminary judgment about materiality to individual accounts (segments) in the financial statements. Also explain why allocating to balance sheet accounts is more common than allocating to income statement accounts.

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Definitions:

CCA

Capital Cost Allowance; a tax deduction in Canada for the depreciation of tangible property.

Earnings Before Interest And Taxes

A measure of a firm's profit that includes all income and expenses except interest and income tax expenses.

Retained Earnings

The portion of a company's profits that is kept or retained rather than distributed to shareholders or owners as dividends.

Net New Equity

The amount of equity capital a company raises through the issuance of new shares minus any shares it has bought back, reflecting the net increase in share capital.