can someone explain to me briefly why A) (FRA, Financial Reporting Standards, EOC question 15) is correct?
15 Which of the following disclosures regarding new accounting standards provides
the most meaningful information to an analyst?
A The impact of adoption is discussed.
B The standard will have no material impact.
C Management is still evaluating the impact.
Answer: “A is correct. A discussion of the impact would be the most meaningful,
although B would also be useful.”
In my opinion, A offers me a discussion of the topic but the discussion might be high level and does not help me to evaluate the impact on financial statements. When choosing B, I know for sure that there will be no impact - so why is A the better choice in your opinion?
So from the point of view of the Analyst where he/she only cares about the financials of a company, the impact of adoption of the new accounting standard is really what the analyst is concerned with.
For example, from the new accounting standard, there’s a change in how goodwill is recognized, this can ultimately impact the bottom line when valuing companies. If there’s no material impact, then the analyst would continue to value the company with the status quo. Hope this helps a bit!
@Iamonfireh@JLK hi guys :),
I do get that the impact of adoption is what’s the most important to the analyst, but i don’t quite get why would answer A differ in importance compared to answer B. I mean, “impact is being discussed” or “management is still evaluating the impact” gives the same level of information to me… Maybe i missed something here, not a native english speaker.
Thanks guys