The Risk That a Borrower Has a Greater Understanding About

question 60

Multiple Choice

The risk that a borrower has a greater understanding about their potential future behavior than a potential lender is known as ________.

• A)the problem of adverse selection
• B)the problem of moral hazard
• C)ornamental torsion
• D)the asymmetric innovation problem

---

Definitions:

IASB And FASB

The International Accounting Standards Board and the Financial Accounting Standards Board, two organizations involved in setting global and U.S. accounting standards, respectively.

Net Liability Contract Position

The net value of obligations exceeding the value of assets held under a contract, indicating a company's financial liability in the context of that contract.

Exposure Draft

A document issued by regulatory or standard-setting bodies to invite public comment on a proposed new standard or amendment to existing standards before finalization.

Revenue Recognition

Accounting principle determining when revenue should be recorded in the financial statements, typically at the time goods or services are provided.