IAS 1's Definition of Current Assets and Further Discussion at Paragraph

question 15

Multiple Choice

IAS 1's definition of current assets and further discussion at paragraph 59 will:

• A)simplify the recognition of current assets.
• B)require greater professional judgement in order to determine an entity's normal operating cycle.
• C)improve analysts' decisions, as ratios that use current assets will use the same information.
• D)have implications for assessing the liquidity of entities as current assets will now include fewer items.

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Definitions:

Decreasing-cost Industry

An industry where costs per unit decline as the industry's output increases due to economies of scale.

LRAC Curve

The Long-Run Average Cost (LRAC) Curve represents the minimum average cost at which any output level can be produced in the long run when all inputs are variable.

Industry Supply

The total quantity of a good or service that is available for purchase in a given industry, at a given time and place.

Supply Schedule

Shows how much of a product firms will sell at alternative prices.