Different Companies Used The Term Earnings

When analysts question a firm’s earnings quality, it raises concerns regarding under or over aggressive accounting practices that may be allowing the firm to manipulate the earnings. Earnings quality is defined as the strength of the current earnings in being used to predict future earnings and cash flows. Since earning quality is indicative of future performance, analysts are more likely to address issues that have substantial impact on the earnings quality. An issue arises when the nature of the earnings is questioned. While permanent earnings are part of normal operations, any irregular, one time earnings can skew the earnings, making the firm look more profitable than it is. This is due to the inability to recreate similar one-time transactions that will give rise to such numbers. Investors prefer predictable

Understandably, there are a variety of ways in which a company can manage their earnings, and if accomplished successfully, the results can be highly profitable. Not all techniques are fraudulent, as effective earnings management is considered good for business and shareholders. Income smoothing is a specific example of permissible earnings management that involves controlling fluctuations in net income to make earnings less variable over a given period of time (Goel & Thakor, 2003). Smoothing is acceptable as long as it adheres to the restrictions of U.S. GAAP, which maintains that all revenues and expenses are accounted for in a defined fashion. There are a lot of incentives in figuring how to effectively smooth income, as substantial value can be created through the successful arrangement of financial transactions. Management is able to make more intelligent decisions with regards to the future of the firm if the earnings are able to match the forecasts. One instance this is seen is when management is faced with the decision to smooth total income or

There are a number of areas on the earnings statement that provide management with opportunities for influencing the outcome of reported earnings.

Companies often try to keep accounting earnings growing at a relatively steady pace in an effort to avoid large swings in earnings from period to period. They also try to manage earnings targets. Reflect on these practices and discuss the following in your discussion post.

VIII. Earnings per Share (EPS) is used by analysts and potential investors to evaluate the profitability of a company.

Information based on accrual accounting has historically and empirically provided a better indication of a company’s ability to generate cash flows than information gathered under the cash method. If there is not inter-period allocation, then the information is not as meaningful and will result in a mismatching of economic benefits

In the accounting field there is always a question whether it’s alright to retain paid in capital and separate it from earn capital. Accountants today have to be really be careful especially with the fact that so many accounting laws are changing in the United States. In this paper I will be explaining why it is important to keep paid-in capital and earned capital separate. I will also be explaining whether paid-in capital is more important that earned capital, or vice-versa. Following that, I will compare basic earnings per-share against diluted earnings per-share and which is more important to investors.

Dechow et al. (2000) focus on firms with positive earnings and firms with zero forecast error to evaluate whether firms manipulate accruals and special items to beat the zero earnings benchmark. However, the result fails to establish a significant difference between the level of discretionary accruals and working capital accruals in firms that achieve the target and those that fall short.

In order to do manipulate those earnings they use different techniques e.g. “cookie jar reserve technique” or “big bath technique”. Accruals accounts are also being used to manipulate those earnings and they are usually found on the balance sheet and embody the non-cash based assets and liabilities. Those accruals are sometimes used as a proxy for earnings management in order to evaluate the quality of the firms’ earnings. By attempting to split the accruals into discretionary and non-discretionary ones one can get a more complex proxy for possible earnings management. Non-discretionary accruals reflect the conditions of a

There is a consensus within the team that Accrual and Cash accounting is the least difficult objective to comprehend. The team believes that the most important factor between the two principal accounting methods is the timing in recording revenue and expenses. The team discussed the differences and unanimously agreed that accrual accounting is the most practical to use for partnership and corporation accounting practices.

On the other hand, income smoothing and earnings management are possible under the historical cost accounting. This is because management could increase the reported income under historical cost accounting through the sales of assets especially when the company is poorly performing in its current financial year. For instance, profit is reported when an asset’s net selling price is higher than the book value based on historical costs. However, under fair value accounting, assets are already at fair value and thus, the possibility of income smoothing is reduced and

Evaluating earnings is very important as it gives an idea of the bank’s ability to maximize revenue and control expenses, and allows a bank to fund growth, cover losses, maintain adequate capital levels and pay dividends. It also represents the quality of a bank’s profitability and its competence to upkeep the quality of the banks and the quality and source of its earnings. The quality of earnings refers to if earnings can and will continue to support the needs of the banks and if they are coming from core earning sources or non-recurring events and are they sustainable. Earnings of JP Morgan Chase and Sagicor is done over a four year period, starting in 2011 and ending in 2014, as this is needed to understand the trend of changes amongst the two companies. Ratios used to analyse the two companies’ earnings are:

Nowadays, as our economy is facing possible everyday crises, managers undergo an increasing pressure in order to keep their company 's earnings stable. Shareholders and analysts expect companies to meet forecasted goals and not to deviate from these. Especially, reliable companies are to report positive results and shall not present any 'surprises '. Managers therefore often turn to their accounting departments for help, whose job it then is to improve the bottom line by changing the information shown in financial

Many people believe that the term of earnings management is understandable in its simple form, but most of those unable to determine whether a selected practice is an earnings management or not. Understanding what earnings management constitutes and why it takes place is important for all users of accounting information. This study highlights the different aspects of earnings management, so it identifies clearly this term, and presents the incentives standing behind its practice. Moreover, the current study determines the methods of earnings management used by firms, and explores how these practices can be detected.

An important function of the accounting field is to provide external users of financial statements with assurance that the financial information being presented is both reliable and accurate. This basic function of accounting is so important that there is an entire field of experts, called auditors, dedicated to assuring its proper performance. Throughout history there have been many instances in which the basic equilibrium between an institution and current/potential investor has been threatened due to a lack of accountability and trust between the two parties. This issue has been the catalyst for many discussions regarding the proper procedures a firm should follow in order to provide