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Basic Question 2 of 4
Which of the following observations signal(s) poor quality of figures provided in the income statement and the balance sheet?
II. Use of special purpose entities (SPEs).
III. Short depreciable lives.
IV. Low pension discount rate.
I. Bill-and-hold sales.
II. Use of special purpose entities (SPEs).
III. Short depreciable lives.
IV. Low pension discount rate.
User Contributed Comments 4
| User | Comment |
|---|---|
| johnnybee | good question |
| ssradja | agreed |
| ashish100 | "The discount rate refers to the level at which future pension obligations are discounted to their present value. A higher discount rate reduces the reported benefit obligation, while a lower discount rate raises the obligation" - danger zone |
| Levancho | Why not III and IV? I understand they are not part of an aggressive accounting practices, but does not conservative assumptions also contribute to the lower quality of the statements? |
You have a wonderful website and definitely should take some credit for your members' outstanding grades.
Colin Sampaleanu
Learning Outcome Statements
describe questions that should be addressed in conducting an industry and competitive analysis;
CFA® 2025 Level II Curriculum, Volume 3, Module 20.