Much of the inherent risk related to long-lived assets is due to the importance of management estimates.

Question

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Long-lived assets, such as buildings, equipment, and intangible assets, require management to estimate their useful lives, salvage values, and future cash flows. These estimates can have a significant impact on the calculation of depreciation, impairment losses, and other important accounting measurements, and therefore, can impact the financial statements and overall risk of the company. As a result, much of the inherent risk related to long-lived assets is due to the importance of management estimates.

Much of the Inherent Risk Related to Long-Lived Assets Is