Disadvantages of Using the Retrospective Application Method Do Not Include

question 37

Multiple Choice

Disadvantages of using the retrospective application method do not include which of the following?

• A) Numbers must be changed on previously released financial statements.
• B) The cost of determining the effect of the change may be greater than the benefits obtained from the increase in comparability.
• C) It has possible impacts on contractual arrangements.
• D) All financial statements consistently apply the same revenue recognition principles.

---

Definitions:

Conversion Ratio

The number of shares an investor gets for converting a convertible security into common stock.

Conversion Premium

The additional cost over the current market value to convert a convertible security into the underlying stock.

Issuance

The process of offering new securities for sale to the public or private investors by a company or government entity.

Continuously Compounded

A method of calculating interest where earnings are immediately reinvested, leading to exponential growth of the investment over time.