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:

Corporate Decision Making

The process by which business leaders make choices that affect the company’s operations, profitability, and strategic direction.

Toyota Motor Corporation

A multinational automotive manufacturer headquartered in Japan, known for producing a wide range of vehicles.

Nominal Price

Absolute price of a good, unadjusted for inflation.

CPI (Consumer Price Index)

An indicator that assesses the weighted mean of the prices for a selection of consumer products and services, including food, transportation, and healthcare, aimed at calculating the living expenses.