One problem that the FASB has noted with overly conservative accounting is that:
A) Under-reporting of income in one period often leads to over-reporting income in future periods.
B) Bankers and creditors tend to be unhappy with conservative balance sheets.
C) This accounting generally forces companies to pay unduly high taxes.
D) This accounting tends to make income too volatile.

Question

Quizplus · Accepted Answer

Overly conservative accounting can lead to under-reporting of income in one period, which may result in over-reporting in future periods as adjustments are made. This can distort the financial performance and position of a company over time.

One Problem That the FASB Has Noted with Overly Conservative