The ________ assumption must be disclosed if results are presented after taxes.
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A. B. C. D. E.Explanation
To be in compliance with the PPS, a firm's presentation of its investment performance must disclose the tax rate information.
The correct answer is A. tax rate.
When financial results are presented after taxes, it is important to disclose the tax rate assumption that has been used in calculating those results. This is because the tax rate assumption directly impacts the amount of taxes paid, which in turn affects the reported financial figures.
The tax rate assumption refers to the estimated tax rate that will be applied to the taxable income of the entity. This assumption is usually based on current tax laws and regulations, as well as management's judgment regarding potential changes in tax rates.
By disclosing the tax rate assumption, users of the financial statements can better understand the calculations behind the reported figures and make informed judgments about the financial health and performance of the entity. It also helps users compare the financial results with those of other entities that may have used different tax rate assumptions.
It's worth noting that the tax rate assumption may vary from one jurisdiction to another, and it can also change over time due to revisions in tax laws or changes in management's judgment. Therefore, the disclosure of the tax rate assumption is necessary to provide transparency and enhance the reliability of the financial information presented after taxes.