An individual's views on measurement techniques for assets and liabilities will have a direct impact on the amount recorded in shareholders' funds.

Question

Quizplus · Accepted Answer

This statement is true. The measurement techniques used for assets and liabilities will affect the reported values of these items on the balance sheet, which in turn will impact the calculation of shareholders' funds. For example, if a company uses a conservative measurement technique (one that values assets and liabilities at a lower amount), it may report lower asset values and higher liability values, which would ultimately reduce the reported amount of shareholders' funds. Conversely, a company that uses a liberal measurement technique (one that values assets and liabilities at a higher amount) may report higher asset values and lower liability values, which would increase the reported amount of shareholders' funds.

An Individual's Views on Measurement Techniques for Assets and Liabilities