ACC305 Wk 2 DQ1 Earnings Management Case 4-3
ACC305 Wk 2 DQ1 Earnings Management Case 4-3 fin571
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Date Created: 11/09/15
Judgment Case 43 page 225 Companies often are under pressure to meet or beat Wall Street earnings projections in order to increase stock prices and also to increase the value of stock options Some resort to earnings management practices to arti cially create desired results Required ls earnings management always intended to produce higher income Explain Judgment Case 43 No Companies generally prefer to report earnings that follow a smooth regular upward path They try to avoid declines but they also want to avoid increases that vary Wildly from year to year It is better to have two years of 15 earnings increases than a 30 gain one year and none the next As a result some companies bank earnings by understating them in particularly good years and use the banked profits to increase earnings in bad years