ca_exm_at1_2011-09 - CGA-CANADA ACCOUNTING THEORY &...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
EAT1S11 ©CGA-Canada, 2011 Page 1 of 6 CGA-CANADA ACCOUNTING THEORY & CONTEMPORARY ISSUES [AT1] EXAMINATION September 2011 Marks Time: 3 Hours Note: All references to the Handbook refer to the CICA Handbook . 30 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. Which of the following statements correctly describes the accounting treatment of cash flow hedges under SFAS 133 and IAS 39? 1) Gains and losses on cash flow hedging instruments are included in current net income. 2) Gains and losses on cash flow hedging instruments are included in current period other comprehensive income. 3) Gains and losses on the hedged item for cash flow hedges are included in current period other comprehensive income. 4) Gains and losses on the hedged item for cash flow hedges are included in current period net income. b. Research on managerial compensation has found that compensation of senior managers of growth firms is more related to share prices of the company than the net income of the company. Which of the following statements best explains this finding? 1) Managerial compensation based on share prices imposes less risk on the manager than does net income-based compensation. 2) Net income-based compensation imposes more risk on the manager than does share price-based compensation. 3) The net income of growth firms suffers from a large recognition lag. 4) Share price has greater precision than net income. c. Under which of the following conditions does accretion of discount equal actual net income? 1) Under ideal conditions of uncertainty 2) Under non-ideal conditions of uncertainty 3) Under ideal conditions of certainty 4) Under non-ideal conditions of certainty Continued. ..
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
EAT1S11 ©CGA-Canada, 2011 Page 2 of 6 d. Which of the following statements describes the reasons why the application of the Black/Scholes model overstates the fair value of executive stock options (ESOs) on the grant date? 1) The intrinsic value of the ESO is assumed to equal the expected present value of the ex-post cost of the ESO. 2) The manager receiving the ESO is assumed to reach his or her reservation utility. 3) The Black/Scholes model assumes that the options will be held to maturity, but holders can exercise the options any time before expiry. 4) The issuance of new shares when ESOs are exercised is assumed not to affect share prices. e.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/30/2012 for the course ACCOUNTING 1204 taught by Professor Chang during the Spring '11 term at Nanjing University.

Page1 / 18

ca_exm_at1_2011-09 - CGA-CANADA ACCOUNTING THEORY &...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online