A Disadvantage of Rules-Based Standards for Users of the Standards

question 16

Multiple Choice

A disadvantage of rules-based standards for users of the standards is:

• A)They may reduce the opportunities for earnings management
• B)They increase comparability of accounting information
• C)They allow for specific structuring of transactions to work around the rules
• D)All of the above are disadvantages.

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Definitions:

Capital Asset

A long-term asset such as equipment, real estate, or machinery that a company uses in its operations to generate wealth.

Loanable Funds

The market where savers provide funds to borrowers, usually influencing interest rates.

Foreign-Currency Exchange

The conversion of one currency into another currency, a critical process for international trade, travel, and investment.

Canadian Company

A business entity that is registered, operates, or was founded in Canada.