Comment on the Validity of the Following Statements

question 198

Essay

Comment on the validity of the following statements. "As an asset loses its ability to provide services, cash needs to be set aside to replace it. Depreciation accomplishes this goal."

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Definitions:

Expensing R&D

The process of charging research and development costs as expenses in the period they are incurred rather than capitalizing them.

Conservatism Principle

an accounting principle that guides companies to report lower values for assets and revenues, higher values for liabilities and expenses when in doubt, ensuring that financial statements do not overstate the company’s financial position.

Impairment Loss

The amount by which the carrying amount of an asset exceeds its recoverable amount, leading to a decrease in the asset's value on the balance sheet.

Carrying Value

The book value of assets and liabilities recorded on the financial statements, often differing from market value.