How competitors calculate depreciation 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

When property, plant, and equipment (PPE) makes up a large percentage of assets and has significantly different useful lives, the method of depreciation used by competitors can have a significant impact on the financial statements and comparisons between competitors. This is because the depreciation expense will vary depending on the method used, and as a consequence, the carrying value of PPE on the balance sheet will differ. This can lead to inconsistencies and distortions in financial ratios such as return on assets (ROA) and return on equity (ROE), making it difficult to compare the performance of different companies.

How Competitors Calculate Depreciation Is Most Likely to Affect Comparisons