Question

a. If management reports truthfully, what economic events are likely to prompt the following accounting changes?
Increase in the estimated life of depreciable assets
Decrease in the uncollectible allowance as a percentage of gross receivables
Recognition of revenues at the point of delivery, rather than at the point cash is received
Capitalization of a higher proportion of software R&D costs

b. What features of accounting, if any, would make it costly for dishonest managers to make the same changes without any corresponding economic changes?
Third-Party Certification
Reversal Effect
Investors’ Lawsuit
Labor Market Discipline.



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  • CreatedFebruary 11, 2015
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