ca_exm_at1_2008-03

Ca_exm_at1_2008-03 - CGA-CANADA ACCOUNTING THEORY CONTEMPORARY ISSUES[AT1 EXAMINATION March 2008 Time 3 Hours Marks Note All references to the

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EAT1M08 ©CGA-Canada, 2008 Page 1 of 7 CGA-CANADA ACCOUNTING THEORY & CONTEMPORARY ISSUES [AT1] EXAMINATION March 2008 Marks Time: 3 Hours Note: All references to the Handbook refer to the CICA Handbook . 20 Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 2 marks each a. The Nash equilibrium is a well-accepted solution concept for a non-cooperative game. However, all parties may be better off by playing a cooperative strategy. How might a cooperative solution be attained if it is not the Nash equilibrium? 1) Each player promises to play the cooperative solution. 2) An additional player, such as an auditor, is brought in. 3) Players establish a reputation for constrained maximization. 4) One or more parties receives a share of the profits. b. Post-announcement drift is a well-known efficient securities market anomaly. There is evidence that post-announcement drift is stronger when there is a lot of competing financial news on the day of earnings announcement than on days when there is little competing news. What is the most likely reason for this finding? 1) Investors have limited attention. 2) Securities markets are efficient. 3) Estimation risk is greater when there is competing news. 4) Earnings information is riskier when there is a lot of competing news. c. In Country A, GAAP requires the release of full information about a firm’s planned investment projects. Country B has similar GAAP, except that it does not require the release of any information about planned investment projects. You have just conducted a detailed comparative statistical analysis of security price response to GAAP information, and have found that the earnings response coefficients (ERCs) are positive in both countries, but higher in Country A than Country B. Which of the following statements best follows from this finding? 1) Information about planned investment projects is decision useful and socially valuable. 2) Information about planned investment projects is decision useful but not necessarily socially valuable. 3) Information about planned investment projects is socially valuable but not necessarily decision useful. 4) No conclusions can be drawn from the information given. Continued. ..
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EAT1M08 ©CGA-Canada, 2008 Page 2 of 7 d. Which of the following items has the lowest earnings persistence? 1) Current research costs of $100 charged to current expense 2) An asset that is accounted for at fair value and written up by $100 3) An asset that is accounted for at historical cost and sold for a loss of $100 4) Increased current period earnings of $100 from a successful advertising campaign e. Which of the following statements
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This note was uploaded on 06/10/2011 for the course ACCT 1204 taught by Professor Chang during the Spring '11 term at Nanjing University.

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Ca_exm_at1_2008-03 - CGA-CANADA ACCOUNTING THEORY CONTEMPORARY ISSUES[AT1 EXAMINATION March 2008 Time 3 Hours Marks Note All references to the

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