Chapter 1
Recognition and Measurement
22
AP-3B (
2
)
For each of the scenarios below, indicate which qualitative characteristic was not followed
based on the following list
•
Comparability
•
Understandability
•
Completeness
•
Neutrality
•
Timeliness
•
Verifiability
a) While reviewing its documents, Conamco Inc. has discovered that no dividend resolutions
were prepared and filed with the legal counsel for the dividends issued last year, yet it
appears that dividends were in fact issued to the shareholders.
b) Calipso Ltd., a multinational pharmaceutical corporation, has decided to acquire a
majority stake in Neva Inc., its biggest competitor in the generic drug market, for $50
billion. No official press conference was conducted to announce the acquisition until four
months after the acquisition has been finalized.
c) The management of Cystico Ltd. ignores the corporate accountant’s suggestion to reduce
the useful life of the computer equipment and depreciate it over a shorter period, thus
taking less depreciation in the current year, as it wants to show a positive bottom line
figure to investors.
d) Navara Inc. has decided to add an additional 42-page long note to this year’s financial
statement, providing the equations used in its asset valuation models, which were
developed by 15 mathematicians over the last seven years.
