Earning Management

Earning Management - Shu-Ya(Rio Peng Instructor Assigned...

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Shu-Ya (Rio) Peng Instructor Assigned Article Summary IV - Earnings Management: Reconciling the Views of Accounting Academics, Practitioners, and Regulators Summary: Academic, practitioners and regulators sees the issue of earning management differently. Regulators and practitioners see earning management pervasive and problematic while academic more concern on studying the phenomenon. Academic may underestimate the capital market incentives for earning management and have difficulty in modeling it. On the other hand, practitioners and regulators may overlook the “usefulness” of earning management. Analysis: GAAP is known for being rule based which contain more details and instructions on what management should follow in setting and applying accounting policies. Unlike GAAP, IFRS is more principal based and management can use more judgments. Which accounting rule will be better for the capital market?
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