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

A publically traded company more than doubled its EPS by changing depreciation methods. In justifying the change, management supported the change as follows: In comparison to direct competitors, the previous depreciation method was more conservative and thus had a negative impact on earnings.

Although difficult to prove, there is considerable evidence that accounting changes are made for reasons other than improved financial reporting. GAAP are flexible in the initial selection of accounting methods and in making subsequent changes. However, the accounting standards specifically require that only changes to preferable accounting methods be made.

Does this violate GAAP? Is this ethical? What would be an alternative course of action?

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ekkarill92 answered 2 years ago
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