A New Accounting Standard Requires ABC Ltd to Recognise as Expense

question 8

Multiple Choice

A new accounting standard requires ABC Ltd to recognise as expense all share-based payments,specifically the issue of options to its employees.Prior to this standard,the company need not do anything until the options are exercised.The manager of ABC Ltd is worried about this new standard as the company is close to a technical violation of its borrowing agreements that the debt-to-equity ratio be less than 40%.Most of the options on issue are cash-settled and will require an increase in liabilities.Which of the following accounting policies if adopted by the company could reduce the likelihood of a debt covenant violation?

• A) switching from accelerated depreciation to straight-line depreciation method
• B) decreasing provision for warranty expenses
• C) revaluing assets upwards
• D) All of the given answers are correct.

---

Definitions:

Prevent Heart Attacks

Strategies or measures taken to reduce the risk factors associated with cardiac arrests, including lifestyle modifications and medical interventions.

Preadolescent Years

Preadolescent years refer to the period of life just before adolescence, often characterized by changes in growth, development, and social interactions.

Teens Or Twenties

A phrase referring to the age group spanning from teenagers through individuals in their twenties, often focusing on this period's developmental challenges and opportunities.

Important Events

Significant occurrences or happenings that have a profound impact on individuals or societies.