An implication of the fact that traditional financial accounting is based on a model that emphasises property rights is that:
A) fair values become of critical importance.
B) such rights are recognised as intangible assets.
C) many social costs are ignored.
D) these financial reports are always prepared on a 'true and fair' basis.

Question

Quizplus · Accepted Answer

Traditional financial accounting focuses on property rights, which means that it may ignore many social costs, such as environmental damage or human rights violations, since these do not directly relate to property rights. This implies that traditional financial reports may not provide a complete picture of a company's impact on society and the environment. Choice A is incorrect because fair values are not necessarily of critical importance in property rights-focused accounting. Choice B is incorrect because property rights are not recognised as intangible assets, but rather as tangible assets such as land or buildings. Choice D is incorrect because financial reports are not always prepared on a 'true and fair' basis - this is a principle that accountants should strive to achieve, but it is not always possible to do so.

An Implication of the Fact That Traditional Financial Accounting Is