CFA Practice Question

There are 90 practice questions for this study session.

CFA Practice Question

Which of the following is least likely to result in low quality earnings?
A. Recording revenues even though the customer has no obligation to pay
B. Reducing liabilities by changing accounting assumptions
C. Using aggressive pension assumptions
Explanation: A is fraud and has NO financial reporting quality. The sales should not be recognized.

User Contributed Comments 10

User Comment
Rotigga Nice trick question.
abhinavkapoor can somebody explain this?
thekobe tricky one
fidcuevas Statements B and C would result in "low quality earnings." Statement A would result in outright fraudulent earnings. I think that's the proper explanation - nice trick question indeed.
johntan1979 Nice one.
CJPerugini Pretty sure "No Quality" earnings is not an actual thing.
CJPerugini "The lowest-quality of financial reports portray fictitious transactions or omit actual transactions; such financial reports are fabrications and not useful to assess earnings quality." - CFA Institute

The quality of earnings cannot be assessed because of low financial reporting quality (non-GAAP compliant).
Inaganti6 this question is nothing short of rape.

It's like asking which one of the following has four legs ?

A chair
A cat
A lizard

you can pick whatever, but if you picked A chair, the answer could be RIGHT because it depended on the assumption the testmaker enforces upon you that they were referring to non living things.

Really hate these kind of questions.
nirens Inaganti6 - well articulated. The sort of question that would be easy to be caught out on late into a test when your brain just wants to do anything else...
ascruggs92 Agree with Inaganti6. This is semantics at it's finest.
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