Reference no: EM13852627
Some companies wish to report a steady growth in income to investors and achieve this goal through accounting practices known as earnings management. One type of earnings management is through the use of reserves for maintenance (also known as cookie jar reserves).
For example, in good years a company may increase maintenance expense by ten or twenty percent over their actual cost for the year. The company will record this by a debit to maintenance expense and a credit to a liability account created for this purpose, called deferred maintenance. In a bad year, the company will debit the deferred maintenance account and credit maintenance expense.
The rationale is that when times are good and the factory is busy, the company may get behind on maintenance. When a slowdown in production occurs, the company has time to catch up on its maintenance.
The actual practice has been observed to have much more to do with the company's ability to report a steady growth in earnings than with the rationale given above.
ASSESSMENT INSTRUCTIONS
Using the information provided in the Context for the assessment, along with other sources of information, write a 3-5-page analysis that addresses the following questions:
Do you think that the practice of earnings management through the use of deferred maintenance is ethical? Defend your answer.
Is the practice of earnings management through the use of deferred maintenance allowed in the United States? How does US GAAP differ in this treatment from International GAAP? Support your answers by the use of at least one reference.
3-5 pages, including references and title page
APA formatting
Times New Roman, 12 point
|
Expectation of inflation is called self-fulfilling inflation
: Typically the government: Inflation caused by people’s expectations of inflation is called self-fulfilling inflation. The _____ the unemployment rate and the _____ the rate of inflation, the higher the misery index. If the nominal rate of interest i..
|
|
How would you assess the effectiveness of this intervention
: You are required to prepare a two- to three-page report addressing the following: What types of intervention would you design and ask the company to implement to address this issue? How would you assess the effectiveness of this intervention
|
|
Explain the foundation of methodism
: John Wesly, was an Anglican minster in the Church of England. his theological writings led to the foundation of Methodism. He traveled tirelessly preaching about personal responsibility, against predestination, and for personal experiences of the ..
|
|
How does us gaap differ in treatment from international gaap
: Is the practice of earnings management through the use of deferred maintenance allowed in the United States? How does US GAAP differ in this treatment from International GAAP? Support your answers by the use of at least one reference.
|
|
A change in the expectations of consumers about prices
: Complete the following table by indicating whether an event will cause a movement along the demand curve for cereal or a shift of the demand curve for cereal, holding all else constant. A decrease in the price of cereal (Movement Along or Shift ?) A ..
|
|
Calculate liquidity ratio of firm for prior and current year
: Calculate liquidity ratios of the firm for the prior year and current year: current ratio, inventory turnover, and the accounts receivable turnover (for the denominator of the turnover ratios.
|
|
Standard deviation of the annual return of this portfolio
: A friend wants your advice. His aunt recently left him $100,000 that he must invest in one or both of two different corporations. The current price per share of each is $100. If your friend buys 1000 shares of the first corporation, what will be the ..
|
|
Disadvantages of using data analytics within facebook
: Define data analytics in general and provide a brief overview of the evolution of utilizing data analytics in business and analyze the main advantages and disadvantages of using data analytics within Facebook.
|