Entities may have a variety of corporate reporting objectives specific to their circumstances, such as:

a. Assessing and predicting cash flows;

b. Minimizing current income taxes;

c. Complying with restrictive covenants (specifically, debt covenants that specify minimum levels of shareholders’ equity); and

d. Evaluating management’s performance.

Required:

For each of the accounting policies listed below, indicate which objectives of corporate reporting are best served. Each policy may serve more than one objective.

1. Capitalize and amortize development costs.

2. Disclose potential lawsuits against the company.

3. Defer expenses to match them against revenue generated from the activity.

4. Delay recognizing revenue as long as possible.

5. Write off goodwill.