Reference no: EM133630843

Assignment: Earnings Management Paper

As you have studied in financial accounting courses, managers of companies have much flexibility in financial reporting, since U.S. GAAP allows flexibility in their accounting choices (e.g., LIFO vs. FIFO) and many numbers on financial statements are generated based on assumptions and estimates (e.g., allowance for doubtful accounts). Such flexibility is given to managers based on the belief that managers would use flexibility to make financial reporting more useful for financial statement users. However, managers of some companies abuse flexibility for the benefit of companies or even themselves. Especially, they distort earnings to window-dress performance of their companies, and, thereby, deter reliable and transparent financial reporting.

For Earnings Management Paper, you will read professional articles, and/or academic research papers to understand various aspects of earnings management. Based on those reference papers and your own further research (if needed), you will write Earnings Management Paper using the structure given below. For your reference, I describe what should be included in each section.

Title of each section for the main body of Earnings Management Paper (Refer to EM 1, EM 2, EM 3, EM 4, wherever needed):

I. Introduction

Question 1. What is the objective of your Earnings Management Paper?

Question 2. How is your Earnings Management Paper structured to support the objective?

II. Definition of earnings management

Question 1. Define earnings management.

Question 2. How would you distinguish between earnings management and earnings manipulation (i.e., fraudulent financial reporting)? Please use specific examples or evidence to support your argument. For examples and/or evidence, you may need to conduct your own research.

III. Motivations for earnings management

Question 1. Discuss motivations for earnings management.

IV. Classification of earnings management

Question 1. How would you classify earnings management? For each classification, please provide a specific example or evidence. For an example and/or evidence, you may need to conduct your own research.

V. Techniques of earnings management

Question 1. Discuss earnings management techniques. For each technique, please provide a specific example. For an example and/or evidence, you may need to conduct your own research.

VI. Conclusion

Question 1. In your own words, describe and reiterate what your Earnings Management Paper is about.