- CFA Exams
- CFA Level I Exam
- Study Session 9. Financial Reporting and Analysis (4)
- Reading 29. Financial Reporting Quality
- Subject 4. Detection of Financial Reporting Quality Issues
CFA Practice Question
Selecting a depreciation method that results in higher earnings than the economic depreciation of the assets warrant is an example of ______
A. following GAAP but selecting alternatives within GAAP that bias or distort reported results to achieve a desired outcome.
B. using loopholes or bright-lines in accounting principles to structure transactions to achieve a desired outcome that differs from the economic structure of the transaction.
C. using unrealistic or inappropriate estimates and assumptions to achieve a desired outcome.
User Contributed Comments 2
| User | Comment |
|---|---|
| dream007 | why not c? clearly the choice of depreciation used is a factor of the estimated useful life of the equipment. |
| viruss | Selecting depreciation giving Income Statement Depreciation < Economic Depreciation : you use a higher estimate working lifetime than the real working lifetime. I went for B because the outcome results in a difference between economic result & accounting result by lifetime manipulation |