Which represents the most significant risk associated with restructuring liabilities on the financial statements?
A)Understatement of assets in the period of recording the liabilities.
B)Future smoothing of income by releasing the reserves.
C)Related party transactions that are not recorded at arms-length.
D)Payroll liabilities that are not disclosed in the notes.

Question

Quizplus · Accepted Answer

Restructuring liabilities can create reserves that can be used to smooth income in the future, which can potentially mislead stakeholders. This is the most significant risk associated with restructuring liabilities on the financial statements. Understatement of assets, related party transactions, and disclosure of payroll liabilities are also potential risks, but they are not as significant as the risk of income smoothing.

Which Represents the Most Significant Risk Associated with Restructuring Liabilities