Managers of Some Entities Have Resisted Depreciating Buildings in Accordance

question 20

Multiple Choice

Managers of some entities have resisted depreciating buildings in accordance with AASB 116.A reason suggested for this,based on the Positive Accounting Theory approach,is:

• A) Depreciating buildings when their value is generally increasing does not make economic sense.
• 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.
• E) None of the given answers.

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