1) All companies should be expected to produce positive operating cash flows every
year.
2) Debt covenants help guard against conflicts of interest between creditors and bank
regulators.
3) Under IFRS the two additional lessor criteria provided under U.S. GAAP, regarding
revenue recognition, are absent.
4) Under the Exposure Draft issued by the FASB (based on joint deliberations with
IASB), most changes in fair value of financial assets would be recorded in net income.
5) The depreciation rate for the double declining balance method is double the
straight-line rate.
6) Some countries’ philosophy of financial reporting differs from GAAP because their
financial reports are required to conform to tax law.
7) Book income tax expense when using interperiod tax allocation results in a proper
matching of revenues and expenses in the income statement.
8) According to most observers, there are numerous strategies for achieving superior
performance in any business.
9) Subprime loans can be securitized as part of a general portfolio of loans.
10) The network of conventions, rules, guidelines, and procedures used by the
accounting profession is known as generally accepted auditing standards.
11) Current liabilities are liabilities expected to be settled after twelve months or one
operating cycle if it is longer.
12) Under IFRS rules, deferred tax assets and deferred tax liabilities are always
reported as noncurrent in a classified balance sheet.
13) Some analysts argue that by merging current cost profits and realized holding gains,
LIFO gives misleading signals about the sustainable operating profits of the company.
14) Bill and hold sales should never be booked as revenue before shipment occurs.
15) Accounting-based incentive plans can encourage managers to adopt a long-term
business focus.
16) Business valuation involves estimating the intrinsic value of a company, or one of
its operating units.
17) An adjusting entry is required whenever all economic events that have occurred are
not already reflected in the accounts.