Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
6 Cards in this Set
- Front
- Back
|
Define: Earnings Management |
Choice by manager that affects earnings to achieve a reported earnings objective |
|
|
List two ways of performing Earnings Management: |
cutting/increasing R&D cutting/increasing advertising Managing Allowance for bad debts/doubtful accounts |
|
|
What are the two types of accruals |
Discretionary: management has little control Non-Discretionary: management has discretion to control amounts |
|
|
What are the four patterns of Earnings Management? |
Big Bath: a one-time charge is taken against income resulting in lower expenses in the future
Income Minimization Income Maximization Income Smoothing (small variation year over year) |
|
|
What were Healy's findings for motivation to perform Earnings Management? |
Managers to motivated to use ti to maximize cash bonuses. He found evidence of upward earnings management when net income between the bogey and cap. |
|
|
What are the 4 motivations for Earnings Management**** |
1. Avoid violation of deb covenants: Dichev 2. Avoiding Political costs: Jones (tariff protection) 3. Meet investors' earnings expectations avoid missing market expectations 4. Increase proceeds from IPO |
