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

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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a Increase in the estimated life of depreciable assets Managers may increase the estimated life of depreciable assets when they realize that the assets are likely to last longer than was initially exp... View full answer

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