AB Manufacturing Ltd has changed the depreciation method of plant and machinery from a straight line method to a reducing balance method. Managers justify the decision that a reduction in earnings in the short run will compensate in the long run. The company has disclosed that the change in the depreciation methods is allowed under the applicable accounting standards (IFRs). However, the disclosure statement doesn't carry sufficient information on the effect of the change on the firm's performance.

Question A2 Earnings quality and reporting quality are the two elements of the quality spectrum. Explain each of the scenarios outlined below in the context of the quality spectrum