CSEET · Fundamentals of Accounting · Depreciation and Amortization
According to AS 10, the depreciation method selected by an enterprise should reflect which of the following?
The method should reflect the pattern in which the asset's future economic benefits are expected to be consumed by the enterprise. AS 10 links the method to consumption of benefits, not to tax savings, profit targets or competitors' practices.
- AThe pattern in which the future economic benefits of the asset are expected to be consumedCorrect
- BThe method that gives the lowest tax liability
- CThe method that shows the highest profit in the early years
- DThe method used by the largest competitor in the industry
Explanation
AS 10 requires the depreciation method to reflect the pattern in which the future economic benefits of the asset are expected to be consumed by the enterprise. Tax savings, profit levels and competitor practice are not the criteria.
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