The Reason Some People Are Concerned About the Possibility for Earnings

question 18

Multiple Choice

The reason some people are concerned about the possibility for earnings management under IFRS is:

• A) The principles-based system might lead preparers of financial statements to try and justify earnings by applying a substance over form concept
• B) The principles-based system might lead preparers of financial statements to try and justify specific accounting outcome based on commercial drivers
• C) It is more difficult to make materiality judgments
• D) It is more difficult to implement a set of generally accepted accounting and financial reporting standards

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Definitions:

Labor Rate Variance

The difference between the actual cost of labor and the expected (or standard) cost, often analyzed in cost accounting or budgeting.

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours allowed for the work done, multiplied by the standard labor rate, indicating the efficiency of labor used in production.

Work in Process Inventory

The cost of unfinished goods in production, including labor, raw materials, and overhead.

PP&E (Net) Account

Property, Plant, and Equipment (Net) account shows the net book value of a company's fixed assets less accumulated depreciation.