In a Restructuring It Is Possible That Managers May Use

question 37

Multiple Choice

In a restructuring it is possible that managers may use the opportunity to write down assets that do not even relate directly to the restructuring action.Why might a manager decide to write down an asset that is not included in the restructuring action?

• A) The manager is practicing conservatism.
• B) The write down relieves future periods of depreciation expense, which increases cash flows.
• C) Normally the stock market reacts positively to restructuring and the greater the amount the better.
• D) The write down relieves future periods of depreciation expense, which increases earnings.