ExpertMedium1 markMultiple Choice
CPA · Question 50 · Area I: Financial Reporting
Which of the following is a disclosure requirement for 'Concentrations' (Risks and Uncertainties)?
Which of the following is a disclosure requirement for 'Concentrations' (Risks and Uncertainties)?
Answer options:
A.
Concentration in the volume of business transacted with a particular customer.
B.
Concentration of employees in a specific age group.
C.
Concentration of office locations in one city.
D.
Concentration of cash in a single bank.
How to approach this question
Disclose concentrations if: 1. Exists at date of FS. 2. Makes entity vulnerable to near-term severe impact. 3. Reasonably possible to occur.
Full Answer
A.Concentration in the volume of business transacted with a particular customer.✓ Correct
A
Concentrations in the volume of business transacted with a particular customer, supplier, lender, grantor, or contributor must be disclosed if the loss of that relationship could have a severe impact.
Common mistakes
Thinking all concentrations must be disclosed (only those meeting the vulnerability criteria).
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