Q2: Consider the following accounting changes: • decrease in the estimated life of depreciable assets • decrease in doubtful debts as a percentage of gross receivables • recognition of revenue from gold mining from when it was extracted rather than when gold is delivered capitalisation of a higher proportion of R&D costs a) If management reports truthfully, what economic events are likely to prompt the above accounting changes? b) If potential earnings management had taken place how would the above accounting changes impact the financial statements?

Q2: Consider the following accounting changes: • decrease in the estimated life of depreciable assets • decrease in doubtful debts as a percentage of gross receivables • recognition of revenue from gold mining from when it was extracted rather than when gold is delivered capitalisation of a higher proportion of R&D costs a) If management reports truthfully, what economic events are likely to prompt the above accounting changes? b) If potential earnings management had taken place how would the above accounting changes impact the financial statements?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 7QE

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