When Adjusting a Division's Accounting Earnings for Use in the Economic

question 93

Multiple Choice

When adjusting a division's accounting earnings for use in the economic value added calculations, R&D spending is usually

• A) subtracted from the division's performance.
• B) depreciated over the life of the average R&D projected and subtracted from the division's performance.
• C) amortized over the life of the average R&D projected and added back to the division's performance.
• D) added back into the division's performance.

---

Definitions:

Equity Method

An accounting technique used to record investments in other companies, where the investment's value is adjusted for profits, losses, and dividends.

Unamortized Acquisition Differential

The portion of the purchase price that is not yet allocated and remains unamortized on the balance sheet after an acquisition.

Goodwill Impairment

A charge that occurs when the fair value of goodwill drops below its recorded cost on the balance sheet, indicating a reduction in the value of acquired assets.

Mark-Up

A sum added to the purchasing price of products to account for overhead expenses and earnings.