Pros and Cons of Earning Management
Earning management is good or not?
Introdcution
This essay is to examine whether earning management is it good or bad. Though there is so many debate about whether it should be accepted to be good rather than bad, however, this essay will explain the both side of earnings management.
Earnings management reduces the quality of financial reporting, it can interfere with the resource allocation in the economy and can bring adverse consequences to the financial market. This essay analyses both, causes and motives of earnings management as well as possible remedies. Therefore, it is not surprising that market participants, legislators, regulators, and academics are concerned with the need to control financial reporting abuses.
The following paper will demonstrate how the effect to the good side and the bad side of it and outline the reason for the impact to appreciate the good and the bad of earnings management. Identify what is key driver of motivation either an earning management is good or bad. This will enable us to analyse the good and bad side nature of the earning management.
BODY
Good Side of Earning Management
There is definitely a good side of earning management if it is properly practice for the benefits of the companies prior to achieving the key performance objective of the companies. Good earnings management means ―reasonable and proper practices. ―Accounting Subjectivity and Earnings Management: A Preparer Perspective‖ referred by Parfet (2000) contends: calls attention to ―the context in which decisions are made, where subtle effects from human perceptions and peer pressures, the complexity of combined factors, and a high-stakes business environment all impact good people who are trying to do their jobs with integrity.
Good side of earnings management describe in the arguments shown as below point (1) and (2).It briefly describe, from contracting perspective earnings management was anticipated by the principal when the bonus contract was
Introdcution
This essay is to examine whether earning management is it good or bad. Though there is so many debate about whether it should be accepted to be good rather than bad, however, this essay will explain the both side of earnings management.
Earnings management reduces the quality of financial reporting, it can interfere with the resource allocation in the economy and can bring adverse consequences to the financial market. This essay analyses both, causes and motives of earnings management as well as possible remedies. Therefore, it is not surprising that market participants, legislators, regulators, and academics are concerned with the need to control financial reporting abuses.
The following paper will demonstrate how the effect to the good side and the bad side of it and outline the reason for the impact to appreciate the good and the bad of earnings management. Identify what is key driver of motivation either an earning management is good or bad. This will enable us to analyse the good and bad side nature of the earning management.
BODY
Good Side of Earning Management
There is definitely a good side of earning management if it is properly practice for the benefits of the companies prior to achieving the key performance objective of the companies. Good earnings management means ―reasonable and proper practices. ―Accounting Subjectivity and Earnings Management: A Preparer Perspective‖ referred by Parfet (2000) contends: calls attention to ―the context in which decisions are made, where subtle effects from human perceptions and peer pressures, the complexity of combined factors, and a high-stakes business environment all impact good people who are trying to do their jobs with integrity.
Good side of earnings management describe in the arguments shown as below point (1) and (2).It briefly describe, from contracting perspective earnings management was anticipated by the principal when the bonus contract was