Why would the nzso wish to smooth income

Reference no: EM132934321

1. What is meant by the term ‘earnings management'? What are the incentives for managers to manage earnings? (from Godfrey)

2. Do you consider earnings management to be good or bad? Why?

3. Outline the five methods discussed in this chapter that entities can use to manage earnings. Discuss the circumstances in which entities are likely to use each method.

4. Table 9.1 presents examples of some common accounting decisions, and how companies following a conservative, moderate, aggressive or fraudulent strategy might use these to manage earnings. Prepare a similar table and complete it in relation to the following accounting decisions:
(a) Revenue recognition from services
(b) Intangible assets
(c) Impairment of non-current assets
(d) Revaluation of non-current assets

5. You have recently been appointed as a researcher for a firm of share analysts. As one of your first roles you are required to prepare a report for your manager to outline common techniques used to manage or manipulate earnings. From your prior accounting knowledge you would have gained an understanding of techniques you can use to examine entity performance and profitability, including trend analysis. Document what strategies you might use as an analyst to detect earnings management using accounting information.

Case study 9.1: The ethics of earnings management

1. Why would the NZSO wish to smooth income?

2. Were the earnings management techniques the NZSO used ethical? Explain your answer.

3. What factors would you consider when determining whether such a decision was ethical?

Reference no: EM132934321

Questions Cloud

What the bonus to be credited to May in admitting Sylvia : Capital balances in the LMM partnership are Lili, Capital P 60,000; Mel, Capital P 50,000 and May, Capital P 40,000. What the bonus to be credited to May

Find and state the health care funding method used : List the health care funding methods used in Canada. State the health care funding method used in your jurisdiction and describe the payroll implication, if any

What are cultural competence and inter-professional practice : What are Cultural competence and Inter-professional Practice? Why are they important to us and what specific elements of Cultural competence and professional pr

Why is cash flow important to a company : Why is cash flow important to a company? Research a case where a company went out of business or declared bankruptcy due to poor cash flow

Why would the nzso wish to smooth income : Why would the NZSO wish to smooth income - What factors would you consider when determining whether such a decision was ethical

What is your estimate of the current stock price : Stock Valuation and PE Rise Above This Corp. currently has an EPS of $ 3.47 and the benchmark PE for the company is 19. Estimate of the current stock price

What can learn from accumulated other comprehensive income : What can learn from accumulated other comprehensive income (AOCI)? Why do firms insist on presenting comprehensive income on statement of shareholder equity

What is the exporter gain or loss : If the spot rate is €1.7 vs. £1 at the settlement date, what is the exporter's gain or loss, assuming it does not hedge

How should handle such situations in financial statement : When is net income margin higher than operating income margin or gross profit margin? How should we handle such situations in financial statement analysis?

User Account

All Pages