The Most Political Issue in the FASB's Most Recent Deliberations

question 79

Multiple Choice

The most political issue in the FASB's most recent deliberations and amendments to GAAP on business combinations was:

• A)The negative effects on subsequent earnings of amortizing goodwill if firms were required to use the purchase method of accounting for the combination.
• B)The negative effects on subsequent earnings of amortizing goodwill if firms were required to use the pooling method of accounting for the combination.
• C)The unrealistic balance sheet assets that would be created if firms were required to use the purchase method of accounting for the combination.
• D)The unrealistic balance sheet assets that would be created if firms were required to use the pooling method of accounting for the combination.

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Definitions:

Barter System

An economic system where goods or services are directly exchanged for other goods or services without using money.

Coincidence of Wants

A situation in a barter system where two parties each have a good or service that the other desires, allowing for a direct trade.

Division of Labor

The assignment of different parts of a manufacturing process or task to different individuals in order to improve efficiency and productivity.

Specialization

The process of focusing on a narrow area of expertise or production to increase efficiency and output.