Which of the following accounting policies is an example of a trade-off between relevance and faithful representation?
A) Research outflows are expensed and development activities expenses are capitalised.
B) Biological assets are stated at fair value unless the fair value cannot be measured reliably.
C) Machinery and equipment are reviewed periodically to assess propriety of useful life estimations used in depreciation.
D) All of the given answers are correct.

Question

Quizplus · Accepted Answer

The policy of stating biological assets at fair value is relevant to users as it reflects their current economic value. However, this policy also requires careful consideration of reliable measurements of fair value, which may not always be possible, leading to a trade-off between relevance and faithful representation.

Which of the Following Accounting Policies Is an Example of a Trade-Off