Practice
Check your answer
Write your response and explain your reasoning.
Classify each Granite Harbor statement below:
- “uses FIFO”;
- “expects three percent returns”;
- “operates four plants”;
- “ASC 330 requires…”; and
- “the controller approved the schedule.”
Explain which one belongs in an accounting-policy note.
Compare your reasoning with the worked answer
FIFO is a selected accounting policy; the expected-return rate is an estimate; four plants is an entity fact; an ASC criterion is authority; and controller approval is a control. A useful policy disclosure explains the entity's material transactions, selection or election, method of application, and reporting effect in current entity-specific language.