Why Is Accounting Conservatism NOT a Basic Principle Underlying Accounting

question 72

Multiple Choice

Why is accounting conservatism NOT a basic principle underlying accounting standards in the People's Republic of China?

• A)It is perceived to manipulate accounting numbers for the benefit of owners by exploiting workers.
• B)It too closely reflects the views of the masses, which are not considered in establishing accounting standards.
• C)Conservatism has been shown to cause economic hardship for companies operating in China.
• D)Conservatism overstates assets, which is perceived to distort financial results.

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Definitions:

Competitive Factors

Elements that influence a company's competitive position within its industry, including cost structure, product quality, brand reputation, and customer service.

Private-label Brands

Products that are manufactured or provided by one company for offer under another company's brand.

Profit Margin

A financial metric used to assess a company's financial health, calculated by dividing net income by revenue. It represents what percentage of sales has turned into profits.

Inventory Costs

Costs associated with storing, managing, and insuring inventory, including opportunity costs of holding inventory.