AICPA CPA-Financial Exam - 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

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Alona

3 months ago

I disagree with D. Inflating values can mislead investors.

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Carla

3 months ago

A is fine, same risks and growth rates mean reliable comparisons.

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Luke

4 months ago

Wait, isn't it normal for estimates to change? D seems a bit sketchy though.

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Anisha

4 months ago

I think C is more concerning. If results aren't reported, how can we trust the info?

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Asuncion

4 months ago

B is definitely a reliability issue. Late statements are a big no-no.

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Dorethea

4 months ago

I’m leaning towards C because if the financial statements don’t match what management is saying, that could definitely undermine reliability.

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Francine

4 months ago

I feel like I've seen a similar question where the focus was on timely reporting, so B seems like a strong candidate.

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Scarlet

5 months ago

I'm not entirely sure, but I remember something about management estimates in option D possibly impacting reliability too.

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Ranee

5 months ago

I think option B might be the answer since issuing financial statements late can affect their reliability.

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Lina

5 months ago

Hmm, I'm a bit unsure about this one. I'll need to review the concepts of revaluation and how the accounting entries should be recorded.

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Audria

5 months ago

Hmm, I'm not sure about COMMIT. Is that a DML command? I'll have to double-check the definitions to be sure.

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Lorrine

5 months ago

Okay, I see the diagram. I think I can figure this out, but I'll need to double-check my work to make sure I get the right answer.

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Matt

5 months ago

Hmm, this looks like a tricky one. I'll need to carefully review the message sending rules to identify the variables in the Basic Message Information.

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Barabara

10 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.

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Crissy

10 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*

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Kanisha

9 months ago

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

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Venita

9 months ago

B) Financial statements are issued nine months late.

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Skye

9 months ago

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

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Jaclyn

9 months ago

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

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Luther

10 months ago

B) Financial statements are issued nine months late.

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Huey

10 months ago

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

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Anthony

10 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.

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Leonora

8 months ago

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

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Michell

8 months ago

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

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Linwood

8 months ago

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

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Yvette

8 months ago

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

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Martha

8 months ago

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

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Tomoko

8 months ago

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

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Toi

9 months ago

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

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Layla

10 months ago

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

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Lai

10 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.

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