Accounting topics where present value-based accounting measurements are relevant include:-taxes-inventory-environmental liabilities -all of these answer choices are correct
environmental liabilities
All of the answer choices are correct. Present value-based accounting measurements are relevant in various accounting topics including:
1. Taxes: Taxes are calculated based on current income that is subject to tax liability. However, certain tax liabilities are not due until future periods. Therefore, companies use present value calculations to determine the amount of tax to be recorded and paid currently.
2. Inventory: Inventory might need to be valued at present value if the cost of production is more than the estimated market price. In such cases, the inventory is valued at the present value of the future cash flows that are expected from the sale of the inventory.
3. Environmental liabilities: Environmental liabilities are the costs incurred by a company to address damage caused by environmental pollution. The costs to remedy the damage are often spread over many years. Present value-based accounting measurements need to be used to calculate the current value of the future cash outflows that are expected to remediate the environmental damage.
Therefore, present value-based accounting measurements play a significant role in accounting and should be considered while calculating taxes, valuing inventory, and recording environmental liabilities.
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