Ethics Question I disagree with material, recently, regarding, management, accounting

sabina

Select the three most useful types of discussions regarding the impact of recently issued accounting changes in management's discussion.
I. The standard does not apply.
II. The standard will have no material impact.
III. Management is still evaluating the impact.
IV. The impact of adoption is discussed.

A. I, II and III.
B. I, II and IV.
C. II, III and IV.

Awnser is B, I picked C

Explanation: III creates some uncertainty about whether the change might materially affect the company.

I disagree with not including III and the explanation given. In the real world an analyst can gain a lot of insight into managements thought process for a number of reasons.

For one you could tell that they are aware of the upcoming change but because of the wording “the” there WILL be an impact presumably material. I say presumably because if their evaluation determines that there is no impact then they would add either option I or II. Wouldn’t that addition be material information?

Also the fact that they are still evaluating the impact could signal that they were caught behind the curve in recognizing and planning for accounting changes before they are issued. At the extreme this could point towards incompetence if the change isn’t that complicated. It’s not like these accounting changes come out of left field.

Additionally, if they don’t address it at all they could be trying to not bring attention to a negative material impact on their next filling. Wouldn’t this go back to that chapter about management shenanigans?

Why is choice I so important. Wouldn’t that be akin to adding the safe harbor statement anytime management is going to make forward looking remarks. What if the standard setters go buck wild one year and make a ton of changes.

kmf229

They're not saying that option III has no value at all - just that the other 3 options are more useful to users of financial statements.
Surely it's better to get concrete statements (ie, this isn't relevant to us, this won't affect us, or this is how it will affect us) rather than a vague 'We're looking at it.'
Hope that helps.

homie

I think of it this way:

Q: What is the status of the case of Mr. A vs the State?

I. The case is dismissed
II. Mr A is not guilty
III. We are still looking into it
IV. Mr A is guilty

Which statement was worthless? Definitely III


ba736 Wrote:
-------------------------------------------------------
> Select the three most useful types of discussions
> regarding the impact of recently issued accounting
> changes in management's discussion.
> I. The standard does not apply.
> II. The standard will have no material impact.
> III. Management is still evaluating the impact.
> IV. The impact of adoption is discussed.
>
> A. I, II and III.
> B. I, II and IV.
> C. II, III and IV.
>
> Awnser is B, I picked C
>
> Explanation: III creates some uncertainty about
> whether the change might materially affect the
> company.
>
> I disagree with not including III and the
> explanation given. In the real world an analyst
> can gain a lot of insight into managements thought
> process for a number of reasons.
>
> For one you could tell that they are aware of the
> upcoming change but because of the wording “the”
> there WILL be an impact presumably material. I say
> presumably because if their evaluation determines
> that there is no impact then they would add either
> option I or II. Wouldn’t that addition be material
> information?
>
> Also the fact that they are still evaluating the
> impact could signal that they were caught behind
> the curve in recognizing and planning for
> accounting changes before they are issued. At the
> extreme this could point towards incompetence if
> the change isn’t that complicated. It’s not like
> these accounting changes come out of left field.
>
> Additionally, if they don’t address it at all they
> could be trying to not bring attention to a
> negative material impact on their next filling.
> Wouldn’t this go back to that chapter about
> management shenanigans?
>
> Why is choice I so important. Wouldn’t that be
> akin to adding the safe harbor statement anytime
> management is going to make forward looking
> remarks. What if the standard setters go buck wild
> one year and make a ton of changes.

Micholien

great analogy thanks