Under ASPE, When Deciding Whether to Recognize a Financial Statement

question 54

Multiple Choice

Under ASPE, when deciding whether to recognize a financial statement element (or not) , and how to measure it, the accountant should

• A) always use estimates.
• B) record "hard" numbers and ignore "soft" numbers.
• C) determine an acceptable level of uncertainty.
• D) recognize a financial statement element even if it cannot be measured.

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Definitions:

Cash Budgeting

The process of estimating future cash inflows and outflows to determine a company's short-term financial health and liquidity.

Payback Period

The length of time required to recover the initial outlay on an investment based on its expected cash flows.

Annual Cash Flows

The net amount of cash and cash-equivalents being transferred into and out of a business during a given fiscal year.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project, calculated as the difference between the present value of cash inflows and outflows over a period of time.