Which of the following statements about income smoothing is true?
A)Incoming smoothing can only be accomplished through revenue recognition policies.
B)Income smoothing can only be accomplished through the use of estimates.
C)IFRS provides more opportunities for income smoothing than under pre-IFRS GAAP.
D)Income smoothing through expense recognition policies is effective if there is a strong relationship between expenses and revenues.

Question

Quizplus · Accepted Answer

Income smoothing through expense recognition policies is effective if there is a strong relationship between expenses and revenues, as matching expenses to related revenues can help to smooth out fluctuations in income over time. Option A is incorrect because income smoothing can also be accomplished through expense recognition policies. Option B is incorrect because income smoothing can be accomplished through different methods, including revenue recognition, expense recognition, and the use of reserves. Option C is incorrect because there is no evidence to suggest that IFRS provides more opportunities for income smoothing than pre-IFRS GAAP.

Which of the Following Statements About Income Smoothing Is True