Where the Entity Uses the Direct Method a Note to the Accounts

question 46

Multiple Choice

Where the entity uses the direct method a note to the accounts reconciling cash flows from operating activities to net profit is required because:

• A) Complex calculations are required to convert cash-based revenues.
• B) Items such as depreciation are only recorded in a cash system and not an accrual system.
• C) There is likely to be a disparity between cash flows from operations under AASB 107 and the profits reported in the statement of comprehensive income.
• D) The direct method is required under AASB 107.

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Definitions:

Individualistic Societies

Societies that prioritize the needs and rights of the individual over those of the group or community.

Group Membership

The affiliation or identification with one or more social groups, which can influence individual attitudes, behaviors, and perceptions.

Reciprocity Principle

The social norm that suggests that people should return a favor or action with another equivalent favor or action.

Search-And-Rescue

Operations or missions tasked with locating and providing aid to people who are in distress or imminent danger.