Today‚ earnings management methods‚ such as income smoothing‚ are becoming more and more ubiquitous ways of improving earnings quality and attractiveness to investors. Because investors pay such close attention to income levels and firm stability‚ such methods are coming under heavy scrutiny‚ and are receiving more attention in the way of research and studies. The scrutiny is an attempt to explain the effects‚ and whether or not‚ in the long-run‚ these methods of earnings management are‚ in fact
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Creative accounting can be defined as a process which involves the accountants to exercise their knowledge of accounting rules to manipulate the figures reported in the accounts of a business. Other terms used may include income smoothing‚ earnings management‚ earning smoothing‚ financial engineering and cosmetic accounting (Boškin 2005). The ways that companies usually manipulate their accounts include recording revenues too soon‚ recording bogus revenues‚ boosting income with one time gains‚ shifting
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Question I Give definition of earning management. Discuss in what instances is earnings managementacceptable and in what instances is it not acceptable. Before defining what earnings management is‚ it is important to understand the meaningof earnings first. Earnings are the profits of a company. Investors and analysts look to earningsto determine the attractiveness of a particular share. Companies with poor earnings prospectswill typically have lower share prices than those with good prospects
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the distribution of earnings in the property-casualty insurance industry$ William H. Beaver‚ Maureen F. McNichols‚ Karen K. Nelson* Department of Accounting‚ Graduate School of Business‚ Stanford University‚ Stanford‚ CA 94305‚ USA Received 2 March 2002; received in revised form 14 January 2003; accepted 27 January 2003 Abstract We document that property-casualty insurers with small positive earnings understate loss reserves relative to insurers with small negative earnings. Furthermore‚ loss
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executive compensation packages. Since stock prices reflect earning reports‚ stock options could be most profitably exercised when income is exaggerated‚ and the stock can be sold at an inflated profit. Companies‚ following standard accounting guidelines‚ use loopholes to tweak their earnings numbers here and there just to make the crucial number‚ earnings per share‚ look better. Ultimately‚ the goal for most companies is to smooth out bumps to show steady or consistent high growth. A company
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Earnings management is not always intended to produce higher income. The manipulation’s purpose is to give the illusion of a smooth income pattern. According to our text‚ “Most executives prefer to report earnings that follow a smooth‚ regular‚ upward path….It is better to have two years of 15% earnings increases than a 30% gain in one year and none in the next” (Spiceland‚ Sepe‚ & Nelson‚ 2011). Spiceland‚ J. D.‚ Sepe‚ J. F. & Nelson‚ M.W. (2011). Intermediate Accounting (6th ed.) The
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II. Discussions A. Lower Earnings Many students enroll in college after high school because they believe it will allow them to find better jobs and make more money than they would without a college degree. Their assumptions are correct most of the time‚ and those who get an especially poor education and do not finish high school can see their employment potential and earnings suffer as well. B. Reduced Social Benefit People who receive a poor education
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Managers should be allowed to manage earnings Our position is that managers should be allowed to manage earnings . 1) Our first argument is that managers and Investors share the same goal of the company ‚which is to keep their revenue and income growth rate constant and smooth . Consider the fact that many ventures or small companies go out of their business every day‚ if they are successful‚ they do in usually one fiscal year. Some of the failure might be due to the state of nature ‚ future
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Shrewsbury‚ England where he enrolled Maidenstone Art College to study film and video. Three years later after earning a BA he went on through London to join a rock n’ roll band. His BA was not very useful in the technical industry so for Adlard finding a job under that catagory proved difficult for him‚ but he was playing the drums in his band so that seemed to be the best option to follow for earning money. A month passed and Adlard ends up back in Shrewsbury looking for what to do next‚ the rockstar life
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THE EFFECT OF CORPORATE GOVERNANCE MECHANISM ON THE QUALITY OF EARNINGS AMONG NIGERIAN DEPOSIT MONEY BANKS BY OZIWELE JAMES ISAAC Being Seminar Paper presented to the Department of Accounting‚ Ahmadu Bello University‚ Zaria in partial fulfillment of the requirements for the award of Ph.D in Accounting and Finance Abstract This paper examines whether corporate governance mechanism variable – Board Size‚ Board Composition‚ Ownership Concentration‚ Institutional Shareholders‚ Dividend
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