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Basic Question 9 of 20
Allocating too much value to depreciable / amortizable assets leads to:
II. higher future operating expense.
III. higher future cash flows.
I. higher assets.
II. higher future operating expense.
III. higher future cash flows.
User Contributed Comments 8
| User | Comment |
|---|---|
| danlan2 | Higher expense==>lower income==>lower tax==>higher cash flow |
| bmeisner | It shouldn't affect cash flows in my opinion, since depreciation and higher COGS due to inventory revaluations are non-cash items. Any thoughts? |
| gardecki | think taxes brmeisner |
| treakj | danlan2, you're genius! I totally forgot that the cash flow can be the same, but the tax will change. Gosh. |
| REITboy | Yeah, but isn't depreciation a non-operating expense? So, why is II right? |
| REITboy | Nevermind... confusing non-operating with non-cash after 4 hours straight on AnalystNotes! |
| epfrndz | Good one danlan2! |
| jimmyvo | This question separates the men from the boys. |
Thanks again for your wonderful site ... it definitely made the difference.
Craig Baugh
Learning Outcome Statements
describe the classification, measurement, and disclosure under International Financial Reporting Standards (IFRS) for 1) investments in financial assets, 2) investments in associates, 3) joint ventures, 4) business combinations, and 5) special purpose and variable interest entities;
distinguish between IFRS and US GAAP in their classification, measurement, and disclosure of investments in financial assets, investments in associates, joint ventures, business combinations, and special purpose and variable interest entities;
analyze how different methods used to account for intercorporate investments affect financial statements and ratios.
CFA® 2025 Level II Curriculum, Volume 2, Module 10.