What type of assessment is used in accrual-based reporting?

Accrual-based reporting focuses on recognizing revenues and expenses when they are incurred, rather than when cash is exchanged. This approach provides a more accurate picture of a company's financial position by taking into account all economic events, regardless of the timing of cash flows.

The assessment of current income and expenses is integral to this method, as it reflects the company's performance during a specific period by matching revenues earned with the expenses incurred to generate those revenues. This principle of matching is a cornerstone of accrual accounting, allowing users to understand the profitability and operational efficiency of a business.

In contrast, while examining past cash flows or estimating future income taxes might provide relevant financial information, these approaches do not directly align with the immediate assessment of income and expenses that is critical in accrual accounting. Likewise, investments performance evaluation tends to focus on investment returns rather than the operational aspects of income and expense recognition tied to the accrual basis.