1) Aging assets and inflation tend to complicate financial statement analysis by
overstating return on assets.
2) A comprehensive risk analysis involves evaluating and summarizing the various
individual risks associated with a loan.
3) In the United States, the accounting rules that businesses use for external financial
reporting purposes differ from the accounting rules required for taxation purposes.
4) Today’s GAAP balance sheet contains a mixture of historical cost and other
measurements to include fair value measurements.
5) IFRS permits two methods for handling actuarial gains and losses, one of which
requires immediate recognition of actuarial gains and losses in pension expense.
6) IFRS and U.S. GAAP rules for revenue recognition and measurement largely
overlap.
7) Balance sheets typically contain both “noncurrent liability” and “long-term
obligation” sections.
8) Changes in accounting principles and changes in the reporting entity are reported
under the retrospective approach.
9) A bank’s estimated bad debt expense associated with its loan receivables is the loan
loss provision.
10) The business environment in which an enterprise operates is of little consideration
in determining whether an underlying event or transaction is unusual in nature and
infrequent in occurrence.
11) An important decision in corporate finance is determining the proper mix of debt
and equity financing.
12) U. S. tax laws limit the deductibility of contributions to pension plans for firms
whose plans are underfunded.