1.Recognition of a past event is sometimes governed by whether a “one-event view” or a “two-event view” is held.
ANS: T
2.Management intent is an accepted basis for recognition of future events.
ANS: F
3.Predicting changes in future economic conditions should be a major consideration in the recognition of future events.
ANS: F
4.Predicting future legal changes that have not yet been enacted should be a major consideration in the recognition of future events.
ANS: F
5.All empirical evidence supports the all-inclusive income concept.
ANS: F
6.Research on the smoothing of year-to-year income suggests that operating income is better predicted by operating rather than all-inclusive income.
ANS: T
7.According to the “big bath theory,” when firms disclose bad news, there is a positive responsive by the market because the firm has recognized in the financial statements that a major problem exists and it is moving to redress the problem.
ANS: T
8.As a result of APB Opinion No. 30, extraordinary items other than gains and losses from early extinguishment of debt have practically disappeared.
ANS: T
9.Extraordinary items should be disclosed net of tax.
ANS: T
10.Prior period adjustments are accounting changes that should be accounted for in comprehensive income on the income statement of the period of change.
ANS: F
11.If a loss is expected on subsequent disposal of a business segment, the estimated loss is recognized in the financial statements as of the measurement date.
ANS: T
12.Return on investment is the most-used summary indicator to date.
ANS: F
13.The elimination of primary earnings per share by SFAS No. 128 is a case of less information leading to more usefulness.
ANS: T
14.A troubled debt restructuring occurs when a creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.
ANS: T
15.A major problem with SFAS No. 114 is that it applies only to creditors, while debtors are still governed by SFAS No. 15.
ANS: T