Lecture 11

Question 1

How can income shifting occur

Answer 1

Income shifting is one method used to manipulate earnings.

Borrow income from the future
Push income from the present to the future

Question 2

What is meant by the reversal property of accounting

What is meant by earning management. What are the two types of earning management

Answer 2

The reversal property of accounting induced by accounting method always reverse in the future.

Earning management is the the manipulation of earnings.

(a) Manipulation that inflates current income is referred to as borrowing income from the future “ aggressive accounting “
(b) Big-bath accounting, Manipulation that reduces current income is called saving o banking income for the future.