Question

Presented below are a number of operational guidelines and practices that have developed over time. Select the assumption, principle, or constraint that most appropriately justifies these procedures and practices. (Do not use qualitative characteristics.) (a) Fair value changes are not recognized in the accounting records. (b) Financial information is presented so that investors will not be misled. (c) Intangible assets are amortized over periods benefited. (d) Agricultural companies use fair value for purposes of valuing crops. (e) Each enterprise is kept as a unit distinct from its owner or owners. (f) All significant post-balance-sheet events are disclosed

Answer 1

Answer: (a) Fair value changes are not recognized in the accounting records - Measurement principle  (historical cost).

(b) Financial information is presented so that investors will not be misled -  corresponds to full disclosure principle.

(c) Intangible assets are amortized over periods benefited - expense recognition principle.

(d) Agricultural companies use fair value for purposes of valuing crops - industry practices or fair value principle.

(e) Each enterprise is kept as a unit distinct from its owner or owners - economic entity assumption.

(f) All significant post-balance-sheet events are disclosed - full disclosure principle.