Problem Two: Earnings Management

question 35

Essay

Problem Two: Earnings Management
Earnings management can be defined as the "purposeful intervention by management in the earnings process, usually to satisfy selfish objectives" (Schipper, 1989).
Earnings management techniques can be separated into those that are "cosmetic" (without cash flow consequences) and those that are "real" (with cash flow consequences).
The management of a company wishes to increase earnings this period.
List three "cosmetic" and three "real" techniques that can be used to achieve this objective and explain why they will achieve the objective.

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Definitions:

Visual Handicap

A condition limiting a person's ability to see, ranging from partial vision loss to total blindness.

Intellectual Disabilities

Disabilities characterized by significant limitations both in intellectual functioning and in adaptive behavior, which covers a range of everyday social and practical skills.

Incremental

Refers to a process of adding or making changes in a series of small, gradual steps.

Entity

Something that exists as a particular and discrete unit, often used in discussions of both physical objects and abstract concepts.