The Limitations of Financial Performance Measures ________

question 48

Multiple Choice

The limitations of financial performance measures ________.

• A) lead management to use accelerated depreciation methods
• B) make it easy for companies to create goal congruence
• C) lead management to use the net book value of assets
• D) can be overcome by taking a broader view of performance with a balanced scorecard

Grasp the accounting treatments and financial statement impacts of stock splits and stock options (both compensatory and noncompensatory).

Understand the principles of stock appreciation rights (SARs) compensation plans and their measurement and exercise dates.

Calculate compensation expense related to stock appreciation rights (SARs) and stock options.

Interpret the accounting treatments for compensatory and performance-based stock option plans.

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Definitions:

Nondeductible Contributions

Contributions to certain retirement accounts that cannot be deducted from current income taxes, but may potentially grow tax-free until withdrawal.

Tax Basis

The value of an asset for tax purposes, used to calculate gain or loss on the sale or other disposition of the asset.

Taxable Portion

The part of an income or transaction that is subject to taxes, after exemptions and deductions have been applied.

IRA Distribution

Money that is taken out from an Individual Retirement Account, which may be subject to taxes and penalties depending on the timing and circumstances of the distribution.