The Reason Some People Are Concerned About the Possibility for Earnings

question 18

Multiple Choice

The reason some people are concerned about the possibility for earnings management under IFRS is:

• A) The principles-based system might lead preparers of financial statements to try and justify earnings by applying a substance over form concept
• B) The principles-based system might lead preparers of financial statements to try and justify specific accounting outcome based on commercial drivers
• C) It is more difficult to make materiality judgments
• D) It is more difficult to implement a set of generally accepted accounting and financial reporting standards

Differentiate between various types of stock (common, preferred, treasury) and their specific characteristics, including how dividends are distributed.

Appreciate how the market value of stock affects corporate actions such as stock dividends and splits.

Recognize the purposes and effects of stock splits and stock dividends on par value, market value, and shareholders' equity.

Know how treasury stock transactions are recorded and their impact on financial statements.

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Definitions:

Egotistical

Characterized by an exaggerated sense of self-importance or superiority over others.

Dominant Defensiveness

A behavioral response characterized by assertiveness or aggression aimed at protecting one's ego or position when perceived to be threatened.

Communication Barrier

Obstacles in the communication process that prevent effective exchange of information and understanding.

Cultural Diversity

The presence of diverse cultural or ethnic groups within a society or organization.