(Qualitative Characteristics) SFAC No. 8 identifies the qualitative characteristics that make accounting information useful. Presented
below are a number of questions related to these qualitative
characteristics and underlying constraint.
A) What is the quality of information that enables users to confirm or
correct prior expectations?
B) Identify the pervasive constraint developed in the conceptual
framework.
C) The chairman of the SEC at one time noted, "If it becomes
accepted or expected that accounting principles are determined or
modified in order to secure purposes other than economic
measurement, we assume a grave risk that confidence in the
credibility of our financial information system will be undermined".
Which qualitative characteristic of accounting information should
ensure that such a situation will not occur?
D) Muruyama Corp. switches from FIFO to average-cost to FIFO
over a 2-year period. Which qualitative characteristic of accounting
information is not followed?
E) Assume that the profession permits the savings and loan industry
to defer losses on investments it sells because immediate recognition
of the loss may have adverse economic consequences on the industry.
Which qualitative characteristic of accounting information is not followed?
F) What are the two fundamental qualities that make accounting
information useful for decisionmaking?
G) Watteau Inc. does not issue its first-quarter report until after the
second quarter’s results are reported. Which qualitative characteristic
of accounting is not followed?
H) Predictive value is an ingredient of which of the two fundamental
qualities that make accounting information useful for decision-making
purposes?
(I) Duggan, Inc. is the only company in its industry to depreciate its
plant assets on a straight-line basis. Which qualitative characteristic of accounting information may not be followed?
J) Roddick Company has attempted to determine the replacement cost
of its inventory. Three different appraisers arrive at substantially different amounts for this value. The president, nevertheless, decides to report
the middle value for external reporting purposes. Which qualitative
characteristic of information is lacking in these data?