The Materiality Constraint

question 71

Multiple Choice

The materiality constraint:

• A) Prescribes that only information that would influence the decisions of a reasonable person need be disclosed.
• B) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.
• C) Provides guidance on when a company must recognize revenue.
• D) Prescribes that accounting information is based on actual cost.
• E) Prescribes that a company record the expenses it incurred to generate the revenue reported.

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Definitions:

Reference Point

A baseline value or condition used for comparison in decision-making processes.

Risk Aversion

A descriptor for individuals or entities that prefer to minimize exposure to risk and uncertainty, typically opting for safer, more secure investments or choices.

Reference Point

A baseline or standard from which changes are measured, often used in decision-making and behavioral economics.

Consumer Decision

The process by which individuals select goods or services to fulfill their needs and wants.