Question

a. Longer depreciable lives and higher salvage values result in lower depreciation charges. How can the selection of useful life and salvage value affect the financial statements? Discuss. b. Explain the concept of verifiability. Would the useful life and/or amount of salvage value selected be verifiable? Discuss. c. Explain the concept of neutrality. Selection of straight-line method over an accelerated method would result in lower depreciation charges in the earlier years. Would the selection of straight-line over an accelerated method be neutral? Explain. Would it be ethical? Explain.

Answer 1

1) Depreciation is defined as the expending of the cost of an asset involved in producing revenues throughout its useful life.

2) Depreciation expense reduces the book value of an asset and reduces an accounting period's earnings. Such Expense is recognised throughout an asset useful life.

3) The calculation of depreciation expense follows the matching principle, which requires that revenues earned in an accounting period be matched with related expenses.

4) Depreciation expense can be calculated in a variety of ways; the method chosen should be appropriate to the asset type, the asset’s expected business use, and its estimated useful life.

VERIFIABILITY:-

Verifiability means that the accounting information presented in financial statements must be verifiable by independent accountants.

The computation of depreciation is affected by three factors:

cost, useful life, and salvage value. A longer useful life and higher expected salvage value.

NEUTRALITY:-

Net neutrality is the principle that Internet service providers treat all data on the Internet equally, and not discriminate or charge differently by user, content, website, platform, application, type of attached equipment, or method of communication.

Selection of straight-line method over an accelerated method would result in lower depreciation charges in the earlier years:-

Put these two side by side and you will be able to see the picture clearer.

In order to make the comparison as fair as possible, let’s assume company XYZ is just starting out as a business and they bought several new computers for their staff. The purchase value of the computers is $10,000.

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ETHICAL DECISION:-

Making ethical decisions when confronted with a dilemma is a key to success along the project leadership journey. Using a framework to guide those decisions can be crucial to advancing project leadership competence. This paper describes the strong connection between ethical decision making and project leadership success, depicts the role that an ethical decision-making model can play, and presents the new five-step PMI Ethical Decision-Making Framework (EDMF) created by the Ethics Member Advisory Group (Ethics MAG) and released PMI-wide. A realistic ethical dilemma is explored using the EDMF. A summary of the benchmarking of other organizations is included, indicating that PMI is at the front of the ethical decision-making trend.