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Earnings management- Examples of where accounting can produce different numbers legally (honestly?).- Interesting ones - perhaps; • LIFO, FIFO Average Cost (Physical / Perpetual) • Depreciation- Why does management do it (not tax)?- Why not produce any numbers you like?- Why not require only one method or estimate?- Why would managers manage earnings?- NOT TAX - we are talking about ‘managing' reported accounting profits not taxable income.- Don't you want to look good - if you can choose which photo, which assessment marks to include etc- Managers want to show results that make their job easier: • High profits - great manager - she should be paid more • Low profits - not ripping the public off - should get government protection - shouldn't be taxed more.- Why not produce any numbers you like?- There are rules; revenue recognition, conservatism etc but there still is ‘wiggle' room (weighted ave v's FIFO).- Corporate law - fraud when you just make up the numbers.- Auditors who independently check that the numbers are ‘true and fair' or ‘presented fairly' within the ‘accounting reporting framework' (e.g. HC)- Post settling up - you can only lie so often.- Why not require only one method or estimate?- That adds a new kind of distortion.- Let's consider a pair of shoes!- How do we depreciate them; method, life, residual value?- Accelerated? Ten years? Always have some value?- OR Straight line? Two years? Zero residual- Imposing structure still gives distortions!- What are we attempting to achieve when producing financial statements? • Useful information (SAC 2 Objective of Financial Reporting) Barth showed useful for predicting.- How do we make the information useful? • Make it relevant, reliable, understandable etc (IASB Framework, Qualitative Characteristics of Financial Reporting) - But problems still remain. • Relevant or Reliable? • Relevant to whom? • Investors or creditors, casual observer?- Conceptual Framework and its application.
Policies regarding when a difference between actual and planned results should be investigated are generally more restrictive for non controllable items than for controllable items.
Be sure to indicate specific ways in which the audit firm should tailor its approach based on the factors you identify.
you work for a local construction firm devry engineering group and your supervisor wants to test your knowledge and
youre provided with the following information for milner corporation effective as of its april 30 2010 year-end.
On August 1, 2015, $100,000 of the bonds were converted. Interest has been accured monthly and paid as due. Any interest accured at the time of conversion of the bonds is paid in cash.
How much must Paul pay in estimated taxes to avoid a penalty (disregard the making work credit)? If Paul paid $1,000 per quarter, would he have avoided the estimated tax penalty?
On March 3, Hinckley Appliances sells $580,000 of its receivables to Marsh Factors Inc. Marsh Factors assesses a finance charge of 3% of the amount of receivables sold. Prepare the entry on Hinckley Appliances' books to record the sale of the rece..
write a c program to implement the concept of class inheritance using different types of bank accounts as a model. in
This assessment will require you to conduct financial statement analysis based on your financial ratio calculations as well as your observation about the company executives' ethical behaviour and the level of quality of the corporate social responsib..
Explain how the Kellogg transactions described could be interpreted as an example of earnings management.
state with reasons that whether the following items are capital or revenuea purchase of land.b installation of plant
Eric lives in a home with a six-plex located at the rear of the property. On his tax returns, he allocates 60% of all expenses to the apartment building.
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