Positive accounting theory predicts that large sized entities will choose not to capitalise their exploration and evaluation expenditures to reduce political costs.

Question

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Positive accounting theory suggests that large companies may choose not to capitalise exploration and evaluation expenditures in order to reduce political costs, as this may face opposition from stakeholders who believe it misrepresents the company's financial position. By not capitalising these expenditures, the company can report lower initial costs and avoid potential criticism.

Positive Accounting Theory Predicts That Large Sized Entities Will Choose