"Big Bath Accounting" Describes a Company's Actions When It

question 20

Multiple Choice

"Big bath accounting" describes a company's actions when it:

• A) Manages its earnings in a downward direction in the year of a major acquisition or restructuring
• B) Optimizes the amount of Goodwill recognized upon paying a premium to acquire another company
• C) Manages its earnings by maintaining such a large number of discretionary items that it could "fill a bathtub," so to speak
• D) "Cleans its books," so to speak, of improperly recorded items in anticipation of a rigorous audit examination

---

Definitions:

Electrician

A skilled tradesperson who installs, maintains, and repairs electrical systems and equipment.

Agent

An individual or entity authorized to act on behalf of another (the principal) in dealings with a third party.

Owner

An individual or entity that legally possesses property, rights, or titles.

Authority

The legal power or right given to an individual or entity to act on behalf of another or make decisions within certain guidelines or scopes.