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

When there is no specific guidance provided by GAAP, the entity should adopt accounting policies that are consistent with the principles of GAAP, which is option i. The entity should also develop accounting policies by exercising professional judgement and applying the conceptual framework, which is option iv. Option ii, which suggests choosing the most conservative reporting choices, may not always be appropriate or necessary. Option iii, suggesting collaborative development with all business units, may be beneficial, but is not necessary or required. Therefore, the best choice is C, which includes the two most important options - i and iv.

In the Absence of Specific GAAP Guidance, an Entity Should