Q2: Consider the following accounting changes: • decrease in the estimated life of depreciable assets • decrease in doubtful debts as a percentage of gross receivables • recognition of revenue from gold mining from when it was extracted rather than when gold is delivered capitalisation of a higher proportion of R&D costs a) If management reports truthfully, what economic events are likely to prompt the above accounting changes? b) If potential earnings management had taken place how would the above accounting changes impact the financial statements?

Question 41 Collateralised debt obligations (CDOs) were responsible for significant damage and disruption to global financial markets as: the securities' cash flow was based on cash flows from other financial securities and not the cash flows from real assets investors accepted the recommendations of CDO arrangers and rating agencies O the CDOs' cash flows were based on cash flows from real assets and not from other financial securities O many investors were unable to assess the fairness of prices

Select all that are true with respect to depreciation. Group of answer choices Depreciation is a cash flow outflow at the time it is recorded in the financial statements Depreciation itself is not a cash flow Accounting depreciation impacts cash flow, Tax depreciation does not Accounting depreciation does not impact cash flow, Tax depreciation does impact cash flow The depreciation tax shield is a relevant cash flow for decision making

Which of the following is an advantage of cash basis accounting vs. accrual basis accounting?   It provides a more accurate representation of cash generated in a specific period. It usually leads to better adherence to the matching principle. It usually provides less volatile year-to-year operating results. It provides a better indication of the entity’s long-run cash-generating ability.