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Group_Assignment_1 - 10 percent opposed to 8 percent-Do you...

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Group Assignment 1 Due Thursday, 9/15/2011 Requirement: As a group complete the following problems from the end of Chapter 6: - Financial Reporting Problem (page 305) - Financial Statement Analysis Case (page 306) I would also like you to think conceptually of how discount rates impact accounting values and what the introduction of fair value accounting means for accounting estimates. Please consider the following in your discussion of the use of fair value accounting and time value of money in calculations: - What would happen to the amount of expense and/or liability that is recorded if the discount rate were to increase or decrease? - Since discount rates can be an estimate (particularly for level 3 fair value), does it leave open the possibility of management manipulation in their favor? For example, can management change the discount rate to increase revenues and/or decrease expenses? (hint: Think about the warranty expense problem if the discount rate were increased to
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Unformatted text preview: 10 percent opposed to 8 percent)-Do you think management manipulate discount rates in order to meet earnings benchmarks (e.g. analyst forecast expectations or internal compensation contract targets)?-How can auditors play a role in ensuring discount rates used in fair value calculations are appropriate?-Historical cost accounting methods are criticized because they are not relevant to investors (e.g. they do not capture the true economic cost of assets and liabilities). Fair value is criticized because it is not as reliable as it is based on management estimates and discretion. Discuss the pros and cons. Turn in a write-up no more than 4 double-spaced pages (12 point font and times new roman) for the two problems from Chapter 6 and the additional thoughts regarding discount rates and their impact on accounting values....
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