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.

  • CreatedFebruary 11, 2015
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