Chapter 1
Recognition and Measurement
14
AP-4A (
2
)
Jim Billings, the accountant of Calimero Ltd., has begun his day by scanning through the daily
assignments list prepared by the department’s manager.
Required
For each task, indicate which qualitative characteristic(s) would be violated if Jim followed the
instruction.
a) I want you to defer the recognition of the $250,000 in sales made this year to next fiscal
year; we already met the sales targets for the year.
b) Can you make the notes to the financial statements really complicated this year? I want
the competitors to be confused and scratch their heads when they read our statements.
Make sure they won’t understand where the figures are coming from.
c) I just came back from Venice and spent about $50,000 on a motel and transportation back
and forth from the airport during the one day I was there. Europe is expensive! I don’t
happen to have any receipts; just record these amounts as a corporate expense.
d) Remember that $200,000 interest-free loan I took from the company a few weeks ago?
Make sure to state that it will be repaid next month (although I have no intention of
repaying it any time soon).
e) I don’t like the amortization method we use; it shows too much depreciation expense. Can
you reduce it by half this year? I don’t care that the competition uses the previous method;
I need to show good profits consistently.
