Published: April, 2022
Earnings management is the use of accounting techniques to produce financial statements that present an overly positive view of a company's business activities and financial position. Many accounting rules and principles require that a company's management make judgments in following these principles.
But the above definition of earnings management does not mean FRAUD.
This online accounting CPE course defines earnings management and then introduces and illustrates the two basic forms: real earnings management and accruals earnings management. It explains earnings manipulation by comparing two earnings management strategies: accrual-based earnings management and real earnings management.
Accrual-based earnings management aims to obscure true economic performance by changing accounting methods or estimates within the Generally Accepted Accounting Principles.
Real earnings management alters the execution of real business transactions.
Speaker Jamie Pratt researched the trade-off between real and accrual-based earnings management by examining whether the preference for one strategy over the other differs between firms with and without political connections. Moreover, they test whether politically connected firms in countries with more public monitoring are more likely to rely on real earnings management strategies than firms in other countries.
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Apr 15th, 2022
Really great. Very interesting info that is useful and presented in an engaging format. The speaker really did a good job presenting a complex topic in an easy to understand manner. One of the best courses on this site.
Jun 16th, 2022
The examples given were very eye-opening!
Jun 29th, 2022