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AICPA CPA-Financial Exam - Topic 2 Question 72 Discussion

According to the FASB conceptual framework, which of the following situations violates the concept of reliability?
B) Financial statements are issued nine months late.
A) Data on segments having the same expected risks and growth rates are reported to analysts estimating future profits.
C) Management reports to stockholders regularly refer to new projects undertaken, but the financial statements never report project results.
D) Financial statements include property with a carrying amount increased to management's estimate of market value.

AICPA CPA-Financial Exam - Topic 2 Question 72 Discussion

Actual exam question for AICPA's CPA-Financial exam
Question #: 72
Topic #: 2
[All CPA-Financial Questions]

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

Show Suggested Answer Hide 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
8 months ago
I disagree with D. Inflating values can mislead investors.
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Carla
8 months ago
A is fine, same risks and growth rates mean reliable comparisons.
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Luke
8 months ago
Wait, isn't it normal for estimates to change? D seems a bit sketchy though.
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Anisha
8 months ago
I think C is more concerning. If results aren't reported, how can we trust the info?
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Asuncion
9 months ago
B is definitely a reliability issue. Late statements are a big no-no.
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Dorethea
9 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
9 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
9 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
9 months ago
I think option B might be the answer since issuing financial statements late can affect their reliability.
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Lina
9 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
9 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
10 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
10 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
1 year 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
1 year 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
1 year 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
1 year ago
B) Financial statements are issued nine months late.
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Skye
1 year 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
1 year 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
1 year ago
B) Financial statements are issued nine months late.
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Huey
1 year 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
1 year 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
1 year 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
1 year 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
1 year 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
1 year 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
1 year 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
1 year ago
I see your point. Option B is also a violation because issuing financial statements late affects their reliability.
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Toi
1 year 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
1 year ago
Option D is definitely the correct answer. It goes against the concept of reliability.
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Lai
1 year 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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Tayna
1 year ago
But what about option D? Including property at an inflated value could also compromise the reliability of the financial statements.
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Clorinda
1 year ago
I agree with Asha. Late financial statements can lead to doubts about the accuracy and completeness of the information provided.
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Asha
1 year ago
I think option B violates the concept of reliability because financial statements should be issued in a timely manner.
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