盈利质量和盈余管理DOC.doc

Earnings Management and Earnings Quality 1. What is Earnings Management? (Bryan Hall ’s Webpage) Earnings management is defined by accounting literature as“ distorting the application of generally accepted accounting principles. ” Arthur Levitt, the old SEC Chairman, defined earnings management as“ practices by which earnings reports reflect the desires of management rather than the underlying financial performance of pany. ” Earnings management is often defined as the planned timing of revenues, expenses, gains and losses to smooth out bumps in earnings. In most cases, earnings management is used to increase e in the current year at the expense of e in future years. For example, companies prematurely recognize sales before they plete in order to boost earnings. Earnings management can also be used to decrease current earnings in order to increase e in the future. The classic case is the use of "cookie jar" reserves, which are established, by using unrealistic assumptions to estimate liabilities for such items as sales returns, loan losses, and warranty returns. Managers engage in e smoothing activities because they know that volatile earnings streams typically lead to lower market valuations. Many essful management teams believe that the strategic timing of investments, sales, expenditures, and financing decisions is an important and necessary strategy for mitted to maximizing shareholder value. Investors are dissatisfied with the management of earnings; however, investors e enraged when quarterly or annual earnings forecast are not met by firms. Therefore, investors and the public view minor earnings management as acceptable and an everyday business practice. In response to plaints and concern for earnings management, the SEC has issued bulletins to help prevent earnings management. 2. The Public Perception of Earnings Management Earnings management has a negative effect on the quality of earnings if it distorts the information ina way that it less useful for pred