In the absence of specific GAAP guidance, an entity should adopt accounting policies that are
I.consistent with specific GAAP guidance.
Ii.consistent with the most conservative reporting choices.
Iii.collaboratively developed with the assistance of all business units.
Iv.developed through exercising professional judgement and applying the conceptual framework.
A)i, ii, and iii
B)i and iii
C)i and iv
D)ii and iv

Question

Quizplus · Accepted Answer

In the absence of specific GAAP guidance, an entity should adopt accounting policies that are consistent with the principles outlined in the conceptual framework and which reflect professional judgement. Therefore, the entity can develop accounting policies through exercising professional judgement and applying the conceptual framework. The policies should also be consistent with specific GAAP guidance, but it is not necessary to always adopt the most conservative reporting choices or to involve all business units in the process. Hence, options i and iii are not always applicable.

In the Absence of Specific GAAP Guidance, an Entity Should