State a particular example of poor accounting quality that might hamper the forecasting of expected future earnings.

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Answer 1

Question

Chapter 6, Problem 1QE

90907-6-1QE

To determine

State a particular example of poor accounting quality that might hamper the forecasting of expected future earnings.

Expert Solution & Answer

Explanation of Solution

Example of poor accounting quality that might hamper the forecasting of expected future earnings:

For example, an entity that reports earnings ruled out by a substantial one-time gain from the sale of real estate tangential to the entity’s operations indicates poor earnings quality as the probabilities are little that the firm can reproduce the gain in upcoming periods.
One more example is an entity stating a huge expense from a warehouse fire that did not have insurance coverage. Excessive small earnings were recorded as the fire loss perhaps is not revealing future earnings of the entity.
But still, it is significant to remember that highly qualified disclosure can alleviate problems relating to earnings quality. If these items are temporary and the firm’s disclosure tags them in a method that highpoints the transitivity, the analyst might exclude the items and earnings quality is high.

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The concept of earnings quality has several dimensions, but two characteristics often dominate. The accounting information should be a fair representation of performance for the reporting period and, The information should provide relevant information to forecast expected future earnings. Provide a specific example of poor accounting quality that would hinder to forecasting of expected future earnings.

Historically, performance measurement systems have been based on accounting or other quantitative numbers. One issue is that some accounting numbers can be affected by the actions of managers, and this may result in distorted performance results. A well-designed performance measurement system should eliminate these potential conflicts, as much as possible. There is a way to prevent these issues associated with using accounting measures as performance measures through use of nonaccounting measures in conjunction with accounting-based measures to help mitigate the problems of using accounting-based measures alone. Most performance measurement systems today use a combination of accounting-based measures and non-accounting-based measures, short-term or long-term indicators, or quantitative and qualitative components. True / False

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Answer 2

Question

Chapter 6, Problem 1QE

90907-6-1QE

To determine

State a particular example of poor accounting quality that might hamper the forecasting of expected future earnings.

Expert Solution & Answer

Explanation of Solution

Example of poor accounting quality that might hamper the forecasting of expected future earnings:

For example, an entity that reports earnings ruled out by a substantial one-time gain from the sale of real estate tangential to the entity’s operations indicates poor earnings quality as the probabilities are little that the firm can reproduce the gain in upcoming periods.
One more example is an entity stating a huge expense from a warehouse fire that did not have insurance coverage. Excessive small earnings were recorded as the fire loss perhaps is not revealing future earnings of the entity.
But still, it is significant to remember that highly qualified disclosure can alleviate problems relating to earnings quality. If these items are temporary and the firm’s disclosure tags them in a method that highpoints the transitivity, the analyst might exclude the items and earnings quality is high.

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Answer 3

Question

Chapter 6, Problem 1QE

90907-6-1QE

To determine

State a particular example of poor accounting quality that might hamper the forecasting of expected future earnings.

Expert Solution & Answer

Explanation of Solution

Example of poor accounting quality that might hamper the forecasting of expected future earnings:

For example, an entity that reports earnings ruled out by a substantial one-time gain from the sale of real estate tangential to the entity’s operations indicates poor earnings quality as the probabilities are little that the firm can reproduce the gain in upcoming periods.
One more example is an entity stating a huge expense from a warehouse fire that did not have insurance coverage. Excessive small earnings were recorded as the fire loss perhaps is not revealing future earnings of the entity.
But still, it is significant to remember that highly qualified disclosure can alleviate problems relating to earnings quality. If these items are temporary and the firm’s disclosure tags them in a method that highpoints the transitivity, the analyst might exclude the items and earnings quality is high.

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Answer 4

Question

Chapter 6, Problem 1QE

90907-6-1QE

To determine

State a particular example of poor accounting quality that might hamper the forecasting of expected future earnings.

Expert Solution & Answer

Explanation of Solution

Example of poor accounting quality that might hamper the forecasting of expected future earnings:

For example, an entity that reports earnings ruled out by a substantial one-time gain from the sale of real estate tangential to the entity’s operations indicates poor earnings quality as the probabilities are little that the firm can reproduce the gain in upcoming periods.
One more example is an entity stating a huge expense from a warehouse fire that did not have insurance coverage. Excessive small earnings were recorded as the fire loss perhaps is not revealing future earnings of the entity.
But still, it is significant to remember that highly qualified disclosure can alleviate problems relating to earnings quality. If these items are temporary and the firm’s disclosure tags them in a method that highpoints the transitivity, the analyst might exclude the items and earnings quality is high.

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Answer 5

Chapter 6, Problem 1QE

90907-6-1QE

To determine

State a particular example of poor accounting quality that might hamper the forecasting of expected future earnings.

Expert Solution & Answer

Explanation of Solution

Example of poor accounting quality that might hamper the forecasting of expected future earnings:

For example, an entity that reports earnings ruled out by a substantial one-time gain from the sale of real estate tangential to the entity’s operations indicates poor earnings quality as the probabilities are little that the firm can reproduce the gain in upcoming periods.
One more example is an entity stating a huge expense from a warehouse fire that did not have insurance coverage. Excessive small earnings were recorded as the fire loss perhaps is not revealing future earnings of the entity.
But still, it is significant to remember that highly qualified disclosure can alleviate problems relating to earnings quality. If these items are temporary and the firm’s disclosure tags them in a method that highpoints the transitivity, the analyst might exclude the items and earnings quality is high.

Answer 6

Chapter 6, Problem 1QE

90907-6-1QE

To determine

State a particular example of poor accounting quality that might hamper the forecasting of expected future earnings.

Expert Solution & Answer

Explanation of Solution

Example of poor accounting quality that might hamper the forecasting of expected future earnings:

For example, an entity that reports earnings ruled out by a substantial one-time gain from the sale of real estate tangential to the entity’s operations indicates poor earnings quality as the probabilities are little that the firm can reproduce the gain in upcoming periods.
One more example is an entity stating a huge expense from a warehouse fire that did not have insurance coverage. Excessive small earnings were recorded as the fire loss perhaps is not revealing future earnings of the entity.
But still, it is significant to remember that highly qualified disclosure can alleviate problems relating to earnings quality. If these items are temporary and the firm’s disclosure tags them in a method that highpoints the transitivity, the analyst might exclude the items and earnings quality is high.

Answer 7

Chapter 6, Problem 1QE

90907-6-1QE

To determine

State a particular example of poor accounting quality that might hamper the forecasting of expected future earnings.

Answer 8

Expert Solution & Answer

Explanation of Solution

Example of poor accounting quality that might hamper the forecasting of expected future earnings:

For example, an entity that reports earnings ruled out by a substantial one-time gain from the sale of real estate tangential to the entity’s operations indicates poor earnings quality as the probabilities are little that the firm can reproduce the gain in upcoming periods.
One more example is an entity stating a huge expense from a warehouse fire that did not have insurance coverage. Excessive small earnings were recorded as the fire loss perhaps is not revealing future earnings of the entity.
But still, it is significant to remember that highly qualified disclosure can alleviate problems relating to earnings quality. If these items are temporary and the firm’s disclosure tags them in a method that highpoints the transitivity, the analyst might exclude the items and earnings quality is high.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

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State a particular example of poor accounting quality that might hamper the forecasting of expected future earnings.

State a particular example of poor accounting quality that might hamper the forecasting of expected future earnings.

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