I was under the impression that changing to a straight line depreciation method from a declining is poor financial quality?
This is a question from a schweser item set where the company changed from accelerated to straight line
"Which of the following is more indicative of lower earnings quality?
a) the change in discretionary expenses
b) the change in the company’s depreciation method
c) the company’s use of LIFO inventory cost flow assumption
In the answer it states:
“the change to the straight line depreciation method is certainly less conservative. However measuring earnings quality based on conservative earnings is an inferior measure as most accruals will correct over time”
Can somebody please explain?