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This post addresses earnings management.

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The concept of earnings management connotes different things to different users of the term. Define earnings management. Discuss why it is difficult to discern whether a firm does in fact practice earnings management.

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The solution provides a detailed discussion explaining earnings management and why it is difficult to discern whether a firm does in fact practice earnings management.

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Earnings management are the techniques and account manipulations that management uses to produce a financial position that is not completely accurate. Through earnings management, management can basically "force" the company to appear more profitable than it is, due to the accounting transactions that they have changed to accomplish this. Under GAAP, certain flexibility is permitted in regards to recognizing revenue. A travel agency, for example, may choose to recognzie revenue when the down payment for the trip is ...

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