Once a decision to restructure is made,GAAP requires companies to
A)accrue for the cost of services to be provided in some future period by lawyers and accountants.
B)overstate estimated charges for future expenditures when such charges are difficult to measure.
C)take excessive restructuring write-offs thereby complying with the conservatism principle.
D)estimate the future costs they expect to incur to carry out the restructuring.

Question

Quizplus · Accepted Answer

GAAP requires companies to estimate the future costs they expect to incur to carry out the restructuring. This estimate should be based on reliable information and reasonable assumptions. Accruing for the cost of services to be provided in the future (A) is not required by GAAP in the context of restructuring. Overstating estimated charges for future expenditures (B) is not in line with GAAP's requirement for reliable estimates. Taking excessive restructuring write-offs (C) is also not in compliance with GAAP's requirement for accuracy in financial reporting.

Once a Decision to Restructure Is Made,GAAP Requires Companies to