Question #37
Reading: Reading 12 Evaluating Quality of Financial Reports
PDF File: Reading 12 Evaluating Quality of Financial Reports.pdf
Page: 32
Status: Incorrect
Correct Answer: A
Your Answer: C
Question
Classification of non-operating income as operating would lead to stated earnings that are likely to be:
Answer Choices:
A. compliant with GAAP and sustainable
B. compliant with GAAP but not sustainable
C. non-compliant with GAAP
Explanation
Non-operating income is less likely to recur and hence the earnings that include such
misclassified non-operating income would be considered non-sustainable. The
misclassification need not always be GAAP non-compliant.