Questions about Financial Reporting and Analysis

CFA Level I FRA
#1

  1. 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
    Why choose A?

  2. A company previously expensed the incremental costs of obtaining a contract. All else being equal, adopting the May 2014 IASB and FASB converged accounting standards on revenue recognition makes the company’s profitability initially appear:
    A. lower
    B. unchanged
    C. higher
    Why choose C?

#2

Up Up Up!!!

#3

Q2: new standard requires costs of obtaining a contract to be capitalized. so net income is not affected. if expensed, net income decreases, profitability would be lower.