A New Accounting Standard Requires the Provision of Liabilities for Share-Based

question 74

Multiple Choice

A new accounting standard requires the provision of liabilities for share-based payments that has implications in the firm's debt-to-equity ratio.Which of the following accounting policy choices will reduce the probability of the firm violating debt covenants in a debt agreement?

• A) Expense all research and development costs.
• B) Shift from FIFO to weighted average inventory method.
• C) Shift from straight-line to accelerated method of depreciation.
• D) Shift from cost to revaluation method in accounting for land and buildings.

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Definitions:

Simple Interest

Interest estimated only on the starting sum, not accounting for any compounding effects.

Evaluate

To determine or set the value or amount of; appraise.

Simplify

The act of simplifying a math expression or equation to its most basic version.

Like Terms

Like terms are terms in an algebraic expression that have the same variables raised to the same power, which can be combined by adding or subtracting their coefficients.