Earning management and cookie jar Coursework Example | Topics and Well Written Essays - 2500 words

Earning management and cookie jar - Coursework Example at that place are various business ethics as well as rules and regulations, which are compulsorily to be followed by every business organization. Many of these rules aim to protect the interest of the customers. Any trade convention that is against the ethics, will lead to legal proceedings and penalties. As per the various sections under the Consumer Protection Act, these entities can be punished if they breach any laws and bring harm to the customers.Earnings management can be delimit as a purposeful intervention in the external financial reporting process, with the intent of obtaining many private gain. (Earnings Management Incentive and Techniques, n.d)Instead of doing business in a proper and transparent way, sometimes the management team may be forced to carry out business illegally due to various reasons. This is due to the fact that human beings are always keen on finding shortcuts for every task and, therefore, th ey always prefer these types of extreme earning management techniques. The common extra earning techniques followed are cookie jar reserve technique, big bath techniques, big bet on the future technique, flushing, (Popular Earning Management Techniques, n.d) fecundation the channel etc.In cookie jar reserve, the accounting rule GAAP is not followed properly. here(predicate) the profits do in the current year are used to cover for mischiefes made in some other year, in order to ensure the profitability of the firm by get together its margin. Big bath is used by companies when stiff competition arises, the company will plan on restructuring (Popular Earning Management Techniques, n.d.) the existing system and policies. Then, instead of recording the cost of such changes made in the organization, this loss is reported as a non-recurring charge against income (Popular Earning Management Techniques, n.d.). This is done for the purpose of maintaining the market