Which of the following statements is/are FALSE? A. Under IAS17, companies would often structure their leases as operating leases instead of finance leases as this provided lessees with a good source of off-balance-sheet funding. B. The capital maintenance concept has been put in place to protect creditors' interests from the risk that a business may go bankrupt and creditors may not be able to recover their claims. C. For business A (with closing inventory of £100m and profit of £20m) the impact of an X% change in closing inventory on profit is higher in proportionate terms than for business B (with closing inventory of £500m and profit of £200m). D. The total assets on the SOFP most often understate the value of the business, due to important intangible assets with subjective valuations missing from the SOFP and the assets shown on the SOFP appearing at their historical cost, when the cost model is used. E. Writing down the value of inventory on the SOFP and recognising increased cost of sales in the Income Statement before actually selling the inventory is an illustration of the prudence convention In your answer, just provide the appropriate letter(s) from A, B, C, D and E above.

Which of the following statements is/are FALSE? A. Under IAS17, companies would often structure their leases as operating leases instead of finance leases as this provided lessees with a good source of off-balance-sheet funding. B. The capital maintenance concept has been put in place to protect creditors' interests from the risk that a business may go bankrupt and creditors may not be able to recover their claims. C. For business A (with closing inventory of £100m and profit of £20m) the impact of an X% change in closing inventory on profit is higher in proportionate terms than for business B (with closing inventory of £500m and profit of £200m). D. The total assets on the SOFP most often understate the value of the business, due to important intangible assets with subjective valuations missing from the SOFP and the assets shown on the SOFP appearing at their historical cost, when the cost model is used. E. Writing down the value of inventory on the SOFP and recognising increased cost of sales in the Income Statement before actually selling the inventory is an illustration of the prudence convention In your answer, just provide the appropriate letter(s) from A, B, C, D and E above.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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