Because accounting depreciation charges often exceed the true economic depreciation of real estate,the earnings of companies owning real estate typically understate the level of operating cash flow.

Question

Quizplus · Accepted Answer

Accounting depreciation charges are a non-cash expense that is meant to allocate the cost of the asset over its useful life. However, the true economic depreciation of real estate may be lower than the accounting depreciation charges, leading to an overstatement of expenses and an understatement of operating cash flow.

Because Accounting Depreciation Charges Often Exceed the True Economic Depreciation