Prior to the Introduction of Impairment Testing Companies Had Attempted

question 4

Multiple Choice

Prior to the introduction of impairment testing companies had attempted to manipulate their financial statements through amortisation:

• A)because where managers were rewarded based on profits attained it was in their best interests to reduce expenses while they held that position.
• B)because contractual arrangements such as debt covenants often required asset values to be maximised.
• C)because recording higher amortisation expenses allowed profits to be reduced, thus allowing tax payments to be minimised without any cash outflows.
• D)because where managers were rewarded based on profits attained it was in their best interests to reduce expenses while they held that position and because contractual arrangements such as debt covenants often required asset values to be maximised.

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Definitions:

Mental Scan

The cognitive process of mentally reviewing or searching through stored information or visual images in the mind.

Kosslyn

Refers to Stephen Kosslyn, a psychologist known for his work in the field of cognitive psychology, particularly in visual cognition and mental imagery.

Distance Scanned

The measure of how far a scanning or detection system can effectively observe or analyze.