CFA Practice Question

There are 90 practice questions for this study session.

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
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