Managers of Some Entities Have Resisted Depreciating Buildings in Accordance

question 30

Multiple Choice

Managers of some entities have resisted depreciating buildings in accordance with AASB 116.Which of the following is the grounds given by directors for failing to act in compliance with AASB 116?

• 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:

Stress

The unconscious preparation to fight or flee that a person experiences when faced with any demand.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a given period.

Distress

Negative stress that results from adverse situations or challenges, causing anxiety or discomfort.

Self-Reliance

Dependence on one's own efforts and abilities; the quality of not needing support, help, or approval from others.