Because of the Uncertainties Involved in Making Future Predictions,AASB 119

question 47

Multiple Choice

Because of the uncertainties involved in making future predictions,AASB 119 requires:

• A) That the long service leave estimate be based on the level of salary paid to employees at the time the entitlement was earned.
• B) That there is no consideration given to future inflation rates or promotion prospects of employees.
• C) That the discount rate used be based on the rates offered by high quality corporate bonds.
• D) That market-adjusted expected cash flows be discounted at the risk-adjusted rate.
• E) None of the given answers.

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Definitions:

GDP Deflator

An economic metric that converts the nominal GDP to real GDP by adjusting for changes in price levels, allowing comparison across years.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of goods and services produced by an economy in a given year at constant prices.

GDP Deflator

A measure of the level of prices of all new, domestically produced, final goods and services in an economy relative to the prices in a base year.

Real GDP

Adjusted Gross Domestic Product for inflation to reflect the actual value of goods and services produced in a country.