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Make a defense against the expected attack on the company

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Reference no: EM132984830

EHT Ltd. is a mining company listed at NYSE. The company recently announced a change in depreciation policy, from a straight-line method to an accelerated depreciation method. Analyses show that such an accounting change results in a reduction of USD15 million on EHT's annual earnings. The company's annual meeting is to be held soon and the president is concerned, expecting to be attacked strongly by a dissident group of shareholders who will claim that the new depreciation policy gives rise to a depreciation expense that is excessive - that is, the company's depreciation policy seriously understates annual earnings per share, possibly causing the shares' market price to be artificially low.

Problem 1: The president has asked you to help make a defense against the expected attack on the company's depreciation policy change. Hint: Apply two financial accounting theories to explain.

Reference no: EM132984830

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