1. Which of the following is not an economic consequence of financial reporting? A. Financial information...
1. Which of the following is not an economic consequence of financial reporting?
A. Financial information can affect the distribution of wealth among investors. More informed investors, or investors employing security analysts, may be able to increase their wealth at the expense of less informed investors.
B. Financial information can affect the level of risk accepted by a firm. Focusing on short-term, less risky projects may have long-term detrimental effects.
C. Financial information can affect the rate of capital formation in the economy and result in a reallocation of wealth between consumption and investment within the economy.
d. Financial information can affect the allocation of psychic income among investors.
2. Which of the following is not an accounting change?
A. Change in accounting principle
B. Change in accounting estimate
C. Change in reporting entity
D. Change because of an error
Homework Answers
1. d. Financial information can affect the allocation of psychic income among investors
All other options that is a, b and c will result in economic consequence of financial reporting but point d will not affect the economic consequence of financial reporting
2. d. Change because of an error
Accounting change is the change in the accounting principle, change in accounting estimate or change in the reporting entity but accounting change does not include Change because of an error
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