How competitors calculate amortization is most likely to affect comparisons between competitors if property,plant,and equipment:
A)makes up a large percent of assets and average useful lives are fairly different.
B)makes up a small percent of assets and assets are financed in a different way.
C)makes up a small percent of assets and average useful lives are fairly similar.
D)is primarily leased in the industry,not purchased.

Question

Quizplus · Accepted Answer

Property, plant, and equipment make up a large percentage of assets, and average useful lives are fairly different. Therefore, the method of calculating amortization is likely to have a significant impact on comparisons between competitors. Different amortization methods might result in different levels of depreciation expense, affecting the companies' profitability, cost structure, and financial ratios differently.

How Competitors Calculate Amortization Is Most Likely to Affect Comparisons