Introduction:A financial information is useful if it is created and compiled for existing as well as potential investors, lenders and other creditors for making vital investment and credit decisions. The fundamental characteristics of useful information as stated in Financial Accounting Standards Board (FASB) includes relevance and faithful representation which means that the information represented in financial statements should be relevant to the business in predicting future events and making prior changes in business decisions. Also, the financial statements should be complete and faithful representation of the information with utmost accuracy.
To choose-If the information that provides feedback about prior expectation is relevant and/or faithfully represented information.
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Chapter 2 Solutions
Cornerstones of Financial Accounting
- Forecasting that uses subjective analysis of subjective inputs is called O Judgmental forecast C Associative Models O Time Series O Hypothesis Testing O Descriptive Statisticsarrow_forwardFor information to be relevant, it has to possess: O A. Only predictive value O B. Only confirmative value O C. Both predictive and confirmatory value O D. Either predictive or confirmatory value, or botharrow_forwardThe use of the word “prior” is a key indicator that information is nonrelevant to a current decision? True / Falsearrow_forward
- Which of the following statements is FALSE about "backward thought process'? Statement I. It considers a variable of interest (the model output) and defines its underlying, or causal, factors. Statement Il. It is a qualitative process. Choices: A. Neither of the two statements is FALSE B. Both statements are FALSE. C. Only statement Il is FALSE. D. Only statement I is FALSE.arrow_forwardMutual funds permit those who desire to save to pool their funds together for the purpose of purchasing financial instruments with large denominations. As a result, the average fund management costs are lower than they would be if individual savers tried to manage their funds individually. This is an example ofarrow_forwardIdentify the appropriate qualitative characteristic(s) being described in the statements below.. Information that is capable of making a difference in a decision is said to have this fundamental quality. Select one: O a. Materiality O b. Comparability O c. None of the answers are correct O d. Faithful representation O e. Relevancearrow_forward
- If an information provides feedback about previous evaluations, it is said to have: a. Relevant value b. Confirmatory value c. Futuristic value d. Predictive valuearrow_forwardWhich of the following statements is/are true? Select one: O A. Planning must precede control O B. Control must precede planning O C. Planning and control occur simultaneously O D. Control is possible without planningarrow_forwardK Which of the following statements about rational expectations is true? O A. Rational expectations are always accurate. B. Rational expectations theory suggests that forecasts errors of expectations are sizable and can be predicted. OC. Rational expectations are the same as adaptive expectations. OD. Rational expectations are identical to optimal forecasts.arrow_forward
- Postpurchase dissonance is a function of a. None of the mentioned b. The difficulty of choosing among the alternatives c. The degree of commitment or irrevocability of the decision d. All of the mentioned e. The importance of the decision to the consumerarrow_forwardDoes the MM theory appear to be correct according to either empirical research or observations offirms’ actual behavior? How do assumptions affectyour conclusion about whether the MM theoryappears to be correct?arrow_forwardDifferentiate between applied and actual FOH with two examples, support your response with occurrence of under and over applied conditions in a real world.arrow_forward
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