A publically traded company more than doubled its EPS by changing depreciation methods. In justifying the...

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Accounting

A publically traded company more than doubled its EPS bychanging depreciation methods. In justifying the change, managementsupported the change as follows: In comparison to directcompetitors, the previous depreciation method was more conservativeand thus had a negative impact on earnings. Although difficult toprove, there is considerable evidence that accounting changes aremade for reasons other than improved financial reporting. GAAP areflexible in the initial selection of accounting methods and inmaking subsequent changes. However, the accounting standardsspecifically require that only changes to preferable accountingmethods be made. Does this violate GAAP? Is this ethical? Whatwould be an alternative course of action?

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4.1 Ratings (678 Votes)

No Its Not voilating the GAAP and this is ethical because a company may decide to change the depreciation method it applies to a fixed asset for Example if an asset loses much of its value early on a company might switch from straight See Answer

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