- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 26. Financial Reporting Quality
- Subject 4. Detection of Financial Reporting Quality Issues
CFA Practice Question
Using extraordinarily long depreciable lives for assets is an example of ______
A. 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.
B. using unrealistic or inappropriate estimates and assumptions to achieve a desired outcome.
C. stretching accounting principles to achieve a desired outcome.
User Contributed Comments 4
| User | Comment |
|---|---|
| moalrahma | dont B and C mean the same thing? can someone clarify please |
| praj24 | "Extraordinary" hence unrealistic/inappropriate |
| ascruggs92 | Stretching the rules would be capitalizing and depreciating costs that would normally be expensed. This situation is more accurately describe as the act of using unrealistic or inappropriate assumptions. |
| NOBA | No. B talks about estimates and assumptions, namely unrealistic or inappropriate estimates and assumptions while c refers to stretching the accounting principles. So it's principles vs estimate and assumptions. These - estimates and assumptions differ from accounting principles. |