Chapter 4

Question 1

Prior to the implementation of IFRS 16, incorrectly treating finance leases as operating leases in the financial statements helped firms to
A. Overstate asset turnover and overstate leverage.
B. Overstate profit margins and understate asset turnover.
C. Understate asset turnover and overstate leverage.
D. Overstate asset turnover and understate leverage.

Answer 1

d

Question 2

Under IFRS the pension expense recognized in the income statement may not be equal to the economic cost of the post-employment benefit plan because
A. Firms can recognize current actuarial gains or losses in other comprehensive income.
B. Firms can recognize past service cost in other comprehensive income.
C. Firms can recognize unexpected plan contributions in other comprehensive income.
D. Both A and B are correct.
E. Both A and C are correct.

Answer 2

a