Question

Which of the following items is consistent with earnings being informative about current performance but not...

Which of the following items is consistent with earnings being informative about current performance but not informative about future earnings?

a.

The firm recognizes an unexpected gain

b.

The firm recognizes a fair value gain on a financial asset as a result of a favorable move in interest rates.

c.

The firm recognizes additional expenses this period due to pre-opening costs associated with new stores.

d.

The firm experiences a large jump in sales and earnings as a result of successful research and development of new products.
Business   Accounting   
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Answer #1

Answer- c. The firm recognizes additional expenses this period due to pre-opening costs associated with new stores.

Explanation-

The firm recognizes additional expenses this period due to pre-opening costs associated with new stores is information about the current performance that the additional expense is recognised due to pre opening cost related with new stores. This only gives the current performance data and does nowhere talks about future performance or earnings .This is not informative about future earnings and expense related items. Thus we can say that option C is consistent with earning being informative about current performance but not informative about future earnings

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