Assuming that the ideal measure of short-term receivables in the statement of financial position is the discounted value of the cash to be received in the future, failure to follow this practice usually does NOT make the financial statements misleading because
A) most short-term receivables are not interest-bearing.
B) the allowance for uncollectible accounts includes a discount element.
C) the amount of the discount is not material.
D) most receivables can be sold to a bank or factor.

Question

Quizplus · Accepted Answer

The amount of the discount on short-term receivables is usually immaterial in relation to the overall financial statements, so failure to follow the discounted value does not usually make the financial statements misleading. Option A is incorrect because some short-term receivables may be interest-bearing, and it is still important to recognize the interest component. Option B is incorrect because the allowance for uncollectible accounts does not include a discount element; it only accounts for the possibility of the debtor not paying. Option D is also incorrect because selling receivables to a bank or factor is not relevant to the measurement of short-term receivables.

Assuming That the Ideal Measure of Short-Term Receivables in the Statement