FRF7

Syllabus C1. Limitations Of Financial Statements 1 / 4

a) Indicate the problems of using historic information to predict future performance and trends.

b) Discuss how financial statements may be manipulated to produce a desired effect (creative accounting, window dressing).

c) Explain why figures in a statement of financial position may not be representative of average values throughout the period for example, due to:
i) seasonal trading
ii) major asset acquisitions near the end of the accounting period.

d) Explain how the use of consolidated financial statements might limit interpretation techniques.
Limitations Of Financial Statements