AICPA Exam CPA-Financial Topic 2 Question 72 Discussion

Actual exam question for AICPA's CPA-Financial exam

Question #: 72
Topic #: 2

According to the FASB conceptual framework, which of the following situations violates the concept of reliability?

AData on segments having the same expected risks and growth rates are reported to analysts estimating future profits.

BFinancial statements are issued nine months late.

CManagement reports to stockholders regularly refer to new projects undertaken, but the financial statements never report project results.

DFinancial statements include property with a carrying amount increased to management's estimate of market value.

Show Suggested Answer

Suggested Answer: B

Choice 'b' is correct. $120,000 expense included in the determination of net income or loss for the sixmonth interim period ended June 30, 1991.

by Rosio at Jul 27, 2023, 08:09 PM

Limited Time Offer

25%

Off

Get Premium CPA-Financial Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Barabara

2 months ago

Option B is a close contender, but nine-month-old financial statements are still more reliable than property values based on management's crystal ball. I'd go with D on this one.

upvoted 0 times

...

Crissy

3 months ago

Wow, these options are like a minefield of unreliable financial reporting practices. I'm glad I don't have to deal with that in my day-to-day life. *cough* Enron *cough*

upvoted 0 times

Kanisha

2 months ago

C) Management reports to stockholders regularly refer to new projects undertaken, but the financial statements never report project results.

upvoted 0 times

...

Venita

2 months ago

B) Financial statements are issued nine months late.

upvoted 0 times

...

Skye

2 months ago

A) Data on segments having the same expected risks and growth rates are reported to analysts estimating future profits.

upvoted 0 times

...

Jaclyn

2 months ago

C) Management reports to stockholders regularly refer to new projects undertaken, but the financial statements never report project results.

upvoted 0 times

...

Luther

2 months ago

B) Financial statements are issued nine months late.

upvoted 0 times

...

Huey

2 months ago

A) Data on segments having the same expected risks and growth rates are reported to analysts estimating future profits.

upvoted 0 times

...

Anthony

3 months ago

I agree, option D is the right answer. Adjusting asset values to management's estimates is subjective and lacks verifiability, which is a key component of reliability.

upvoted 0 times

Leonora

25 days ago

Agreed. Reliability is one of the fundamental qualities that financial information should possess to be useful for decision-making.

upvoted 0 times

...

Michell

26 days ago

I see your point. It's crucial for financial information to be consistent and reliable for users to make informed decisions.

upvoted 0 times

...

Linwood

30 days ago

I think option C also violates reliability. If management reports on projects but the financial statements don't, that could be misleading.

upvoted 0 times

...

Yvette

1 months ago

Option D is definitely the answer. It's important for financial statements to be based on objective and verifiable information.

upvoted 0 times

...

Martha

1 months ago

I agree with all of you. Option A is the only one that does not violate the concept of reliability.

upvoted 0 times

...

Tomoko

1 months ago

I see your point. Option B is also a violation because issuing financial statements late affects their reliability.

upvoted 0 times

...

Toi

1 months ago

I think option C is also a violation of reliability. Reporting on new projects without showing the results is misleading.

upvoted 0 times

...

Layla

2 months ago

Option D is definitely the correct answer. It goes against the concept of reliability.

upvoted 0 times

...

Lai

3 months ago

Option D seems to be the correct answer. Reporting property at a market value estimate rather than historical cost violates the reliability concept of the FASB framework.

upvoted 0 times

...