Earnings Management Techniques [Video]

Companies employ a variety of methods for managing earnings (or committing accounting fraud). These earnings management techniques can be categorized as follows:

(1) improper revenue recognition
(2) changing the timing of events (e.g., selling an investment to book a gain)
(3) improper capitalization (capitalizing routine expenses)
(4) manipulating estimates (or changing accounting methods)
(5) altering business decisions (e.g., postponing maintenance on equipment)
(6) engaging in related-party transactions
(7) engaging in mergers and acquisitions
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