If technology changes rapidly,what should a firm do?

Question

Quizplus · Accepted Answer

Considering an accelerated rate of depreciation would be the best choice for a firm if technology changes rapidly. This is because accelerated depreciation allows the firm to allocate more depreciation expense to earlier periods, reflecting the higher rate of technological change and reducing the carrying amount of the assets on the balance sheet more quickly. This is in comparison to straight-line depreciation, which assigns equal depreciation expense throughout the useful life of the asset, and depreciating plant assets over long periods of time, which may not accurately reflect the asset's diminishing value in a rapidly changing technological environment. Expensing plant assets immediately is not a feasible option as it would significantly impact the company's financial stability and profitability.

If Technology Changes Rapidly,what Should a Firm Do