Select the incorrect statement regarding the analysis of absolute amounts of various accounts reported on the financial statements.
A) Financial statement users with expertise in particular industries can look at absolute amounts and assess a company's performance in a certain area.
B) To correctly evaluate an absolute amount, the analyst must consider its relative importance.
C) Economic statistics such as the gross national product are built upon totals of absolute amounts reported by businesses.
D) Using absolute amounts eliminates the problem of varying materiality levels.

Question

Quizplus · Accepted Answer

Using absolute amounts does not eliminate the problem of varying materiality levels. Materiality is a concept whereby a financial statement item is material if its omission or misstatement could influence the economic decisions of users taken based on the financial statements. Thus, different levels of materiality may affect how users interpret and evaluate absolute amounts on the financial statements.

Select the Incorrect Statement Regarding the Analysis of Absolute Amounts