pre class quizz #10

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The difference between debt and equity in an entity’s statement of financial position is not easily distinguishable for preparers of financial statements. Some financial instruments may have both features, which can lead to inconsistency of reporting. The international Accounting Standards Board has agreed that greater clarity may be required in its definitions of assets and liabilities for debt instruments. It is thought that defining the nature of liabilities would help the IASB’s thinking on the difference between financial instruments classified as equity and liability. a) Explain why it is important for entities to understand the impact of the classification of a financial instrument as debt or equity in the financial statements Witco Limited patented and successfully tested a new e-cigarette. To expand its ability to produce and market this new product, Witco needs to raise $400,000.On January 1 2010, Witco issued a 12% $400,000, 5 year bond. The bond pays interest semi-annually…

The difference between debt and equity in an entity's statement of financial position is not easily distinguishable for preparers of financial statements. Some financial instruments may have both features, which can lead to inconsistency of reporting. The international Accounting Standards Board has agreed that greater clarity may be required in its definitions of assets and liabilities for debt instruments. It is thought that defining the nature of liabilities would help the IASB's thinking on the difference between financial instruments classified as equity and liability. a) Explain why it is important for entities to understand the impact of the classification of a financial instrument as debt or equity in the financial statements b) Witco Limited patented and successfully tested a new e-cigarette. To expand its ability to produce and market this new product, Witco needs to raise $400,000. On January 1, 2010, Witco issued a 12% $400,000, 5-year bond. The bond pays interest…

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What role should the precautionary principle play in the development and application of accounting standards

Which of the following statements is consistent with the principle of control as defined by IFRS 10 Consolidated Financial Statements? a. The investor must be exposed to a return from the investee. b. The investor has the ability to use its power over the investee to affect the amount of the returns from the investee. c. An investor yet to direct the relevant activities of an investee has no power over the investee.  d. An investor cannot have control over an investee if another investor has existing rights to participate in the direction of the relevant activities.

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Which of the following is a provision of the Sarbanes-Oxley Act? a. Lessens penalties for corporate fraud b.Developed the Consumer Financial Protection Bureau c. Recommends codes of ethics for financial reporting in corporations d. Makes fraudulent financial reporting a civil offense e.Requires greater transparency in financial reporting