The Following Is a Definition of Earnings Management

question 9

Essay

The following is a definition of earnings management:
"Earnings management is recognized as attempts by management to influence or manipulate reported earnings by using specific accounting methods (or changing methods), recognizing one-time non-recurring items, deferring or accelerating expense or revenue transactions, or using other methods designed to influence short-term earnings." Explain what is meant by this statement in the context of the discussion in the chapter.
[This statement comes from an excellent article on the issue titled "Earnings Management and its Implications." You may want to discuss parts of the article with your students. The article can be found at: http://www.nysscpa.org/cpajournal/2007/807/essentials/p64.htm]

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Definitions:

Negotiable Instrument

A voucher confirming the remittance of a specified financial amount, payable either immediately upon demand or on a scheduled date, with the payer's details included on the document.

Alters

In legal or general context, to change or modify something, such as a document, condition, or situation.

Holder In Due Course

A legal term for an individual or entity that has acquired a negotiable instrument in good faith and for value, and therefore has certain rights above the original payee.

Negotiates

The process by which parties come together to try and reach an agreement on a matter, often involving discussion and compromise.