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Basic Question 1 of 22
Using a narrowly defined rule on consolidation of SPEs for a leasing transaction to justify non-consolidation of SPEs in other types of transactions results in a low quality of earnings. This is an example of ______.
B. using loopholes or bright-lines in accounting principles to structure transactions to achieve a desired outcome that differs from the economic structure of the transaction
C. using unrealistic or inappropriate estimates and assumptions to achieve a desired outcome
D. stretching accounting principles to achieve a desired outcome
A. following GAAP but selecting alternatives within GAAP that bias or distort reported results to achieve a desired outcome
B. using loopholes or bright-lines in accounting principles to structure transactions to achieve a desired outcome that differs from the economic structure of the transaction
C. using unrealistic or inappropriate estimates and assumptions to achieve a desired outcome
D. stretching accounting principles to achieve a desired outcome
User Contributed Comments 1
| User | Comment |
|---|---|
| vatsal92 | A. No GAAP priciple is mentioned. B. Second best choice as the economic structure is changed C. No estimates are made D. Applicabilty of non-applicable principle, hence more correct than B. |
I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach
Learning Outcome Statements
describe presentation choices, including non-GAAP measures, that could be used to influence an analyst's opinion
describe accounting methods (choices and estimates) that could be used to manage earnings, cash flow, and balance sheet items
describe accounting warning signs and methods for detecting manipulation of information in financial reports
CFA® 2025 Level I Curriculum, Volume 3, Module 10.