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Intermediate Accounting Study Set 7

Business

Quiz 3 :

Judgment and Applied Financial Accounting Research

Quiz 3 :

Judgment and Applied Financial Accounting Research

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________ occurs when managers manipulate financial information and misrepresent the firm's financial position and performance.
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A

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The footnote outlining the portfolio of accounting choices is one of the first footnotes in the financial statements.
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True

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Explain why allowing management and their accountants to choose between various accounting methods when applying accounting standards is a good thing as opposed to requiring strict compliance with the application of specific methods.
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The flexibility afforded in the selection and application of accounting standards permits managers and accountants to choose those methods and assumptions that best reflect the economic reality of their transactions. Therefore, the financial information provided and user decisions based on that information may be enhanced by not requiring all companies to use certain accounting methods that may not be appropriate based on the unique circumstances of the situation and the entity.

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When accountants use judgment to interpret standards, it often detracts from the usefulness of the financial statements.
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Earnings management occurs when managers manipulate financial information and misrepresent the firm's financial position.
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Accountants must often use judgment when deciding when to recognize revenue.
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When compared to U.S. GAAP, IFRS requires that companies disclose additional information about assumptions and estimates made at the end of the reporting period.
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Your classmate, Marla Smith, tells you that she likes accounting because it provides a clear-cut set of methods and rules to follow. As a result, it should be an easy job to get the hang of. Explain to her why accountants frequently need to use their judgment. Give specific examples.
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An example of a judgment in accounting for Accounts Receivable is ________.
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Very few amounts reported on the financial statements are based upon assumptions.
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The process by which an accountant reaches a decision in situations with multiple alternatives is referred to as ________.
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An example of a judgment in accounting for product warranties is ________.
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Accountants use judgment when ________.
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Accounting standards allow financial statement preparers to use judgement in a manner that best represents ________.
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In practice, accountants frequently use ________ to prepare and audit financial statements.
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IFRS and U.S. GAAP have the same disclosure requirements regarding the estimates made at the end of the accounting period.
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Accounting judgment occurs when managers manipulate financial information and misrepresent the firm's financial position.
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Management is afforded a certain amount of latitude and must exercise judgment when selecting accounting methods. Discuss why this could be problematic for users of financial statements. Provide examples.
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Which of the following is true with regards to judgement and flexibility in selecting accounting methods and applying accounting standards?
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Financial statement users rely on the accounting policies footnote information to compare a company to other firms in the same industry.
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