Research Conducted in Australia Suggests That Only a Limited Number

question 22

Multiple Choice

Research conducted in Australia suggests that only a limited number of companies involved in the extractive industries choose to revalue their reserves to their expected fair value.Reasons suggested by the researchers for the low number of revaluing firms include:

• A) Since firms in the extractive industries are generally considered to be subject to low levels of political scrutiny, they would prefer to record lower asset levels and higher profits.
• B) The increase in value would never be reflected as income under AASB 1041.
• C) The companies in the industry generally have high levels of debt so maintaining the carrying value of reserves at cost improves their leverage measures.
• D) Maintaining the carrying value of reserves at cost makes the company a less attractive take-over target.
• E) All of the given answers.

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