A Company Incurs Significant Costs in Relation to a Speculative

question 48

Multiple Choice

A company incurs significant costs in relation to a speculative mining project that intends to turn rocks into gold.In accordance with the AASB's Conceptual Framework,the costs of this project would be an:

• A)expense because there is little probability that future economic benefits will eventuate.
• B)expense because the recognition criteria for an asset is not satisfied.
• C)asset because the definition and recognition criteria for assets are satisfied.
• D)asset because the company will control the future economic benefits.

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Definitions:

Intangible Costs

Costs that are not directly measurable in monetary terms, such as brand value, intellectual property, and customer relationships.

Factor-Rating Analysis

A method for comparing the desirability of multiple options or locations based on a set of criteria, each weighted according to its importance.

Facility Location

The process of determining the most suitable location for a company’s manufacturing or service operation for optimization of its efficiency and effectiveness.

Zoning Regulations

are legal rules defining how property in specific geographic zones can be used, affecting land use, building heights, densities, and the separation of residential areas from commercial and industrial ones.