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 ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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