Managers of Some Entities Have Resisted Depreciating Buildings in Accordance

question 62

Multiple Choice

Managers of some entities have resisted depreciating buildings in accordance with IASB 16.Which of the following is the grounds given by directors for failing to act in compliance with IASB 16?

• A)Depreciating buildings when their values are generally increasing over time.
• B)Management is concerned that the effect on ratios such as the times interest-covered and debt/equity may lead to an entity breaching its debt covenants.
• C)Management considers that when the asset is sold the amount of gain or loss that will be reflected in the books will be incorrect.
• D)Depreciating buildings when their value is generally increasing does not make economic sense and management is concerned that the effect on ratios such as the times interest-covered and debt/equity may lead to an entity breaching its debt covenants.

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Definitions:

Portfolio's Beta

A measure of the volatility, or systemic risk, of a portfolio in comparison to the market as a whole.

Standard Deviation

A measure of the dispersion or variation in a distribution or set of data, widely used in statistics to gauge the volatility of financial returns.

Equally-weighted Portfolio

An investment portfolio in which all assets are allocated the same proportion of total investment.

Total Risk

The complete range of risk associated with an investment, including both systematic and unsystematic risk.