Earning Management Essay Example for Free

Earning Management Essay â€Å"Earning Management† refers to those accounting practices that may follow the letter of the rules of fundamental rules of accounting practices but unethically misrepresented to the users of accounting information. For the personal interest managers often try to show outstanding performance of the business and use the strategic way to falsify Income, Assets or Liabilities. Earning Management as generally understood refers to systematic misrepresentation of the true income and assets of corporations or other organizations. Creative accounting is at the root of a number of accounting scandals, and many proposals for accounting reform – usually centering on an updated analysis of capital and factors of production that would correctly reflect how value is added. Quality of accounting information is one of the Fundamental Concepts of Accounting Framework. Where it’s mentioned that, accounting information must be Relevant, Reliable, Comparable, and Consistent Comparable (Intermediate Accounting by Keiso, Weygandt, Warfield, 12th edition). Unless having these qualities a report cannot be treated as qualified. Managers that always promise to make the numbers will at some point be tempted to make up the numbers. – Warren Buffet Definition of Earning Management * Managing earnings is â€Å"the process of taking deliberate steps within the constraints of generally accepted accounting principles to bring about a desired level of reported earnings.† (Davidson, Stickney and Weil (1987), cited in Schipper (1989) p. 92) * Managing earnings is â€Å"a purposeful intervention in the external financial reporting process, with the intent of obtaining some private gain (as opposed to say, merely facilitating the neutral operation of the process).†Ã¢â‚¬ ¦ â€Å"A minor extension of this definition would encompass â€Å"real† earnings management, accomplished by timing investment or financing decisions to alter reported earnings or some subset of it.† (Schipper (1989) p. 92). * â€Å"Earnings management occurs when managers use judgment in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about the underlying economic performanc e of the company or to influence contractual outcomes that depend on reported accounting numbers.† (Healy and Wahlen, 1999, p. 368) Motivators Earning Management * Meet financial analysts estimates of earnings that leads to performance-based compensation * Raise the stock price thereby enhancing the value of stock options * Smooth net income making it appear that the earnings are increasing at a steady rate * Make it look as though future earnings are higher than they really are by establishing cookie jar reserves (inflated expenses) in the current year that can be drawn on in future years. (Dr. Steven Mintz, Professor and Area Chair, Cal Poly, San Luis Obispo) Conceptual Framework for Financial Reporting From this figure we’ve indicated that in the level – 2, where bridge between 13 creates should be the concerning point of maintaining the qualities of Accounting Information. Qualities are not only help to detect falsification, but also helps users to take decisions. Primary Qualities: * Relevance – It helps users to predict the ultimate outcome of past, present, and future events. It also helps users to predict that, how much loss/profit company can made. * Timeline – Specific timeline of accounting period helps users to trace out the business performance over the years. * Reliability – To assure that the information is verifiable, faithful and reasonably free of error and bias. Secondary Qualities: * Comparability – The reported information should be measured such a way that it can be compared with other company’s reports. * Consistency – Treatment of similar events from period to period must be used by same accounting standards. Standards cannot be changed suddenly, unless it’s proved that new method is better than previous. Perspective of Earning Management There are two perspectives on earnings management. (1) the Opportunistic perspective, states that managers seek to mislead investors by showing attractive predetermined accounting information, (2) the Information perspective, first enunciated by Holthausen and Leftwich (1983), under which managerial carefulness is a means for managers to reveal to investors their private expectations about the firms future cash flows. (Earnings Management: A Perspective by Messod D. Beneish) Accrual vs. Earning Management Plenty of research report shows managers try to use Accrual in financial engineering. Accruals are the difference between net income and cash flows. For example, when companies sell items to others on credit during a growth period, the sale creates an accrual of revenue. When companies engage in earnings management, they can increase or decrease income by creating accruals; these are often referred to as non – discretionary (flexible) accruals. Reasons behind using accrual as the engineering tool are – * Accruals are the principle product of GAAP, so it’s easy to do falsification with camouflage. * Accruals resolve some problems related with the effects choosing various accounting methods. * It will be hard for investors to see effect of unobservable components of accrual. Types of earnings management Theoretically there are two types of earnings management. They are income increasing and income decreasing earnings management (Messod, 2001). a) Income Increasing earnings management: As the name suggests, income increasing earnings management is the process to boost up net income of the company intentionally (to hide the poor performance) so that investors get some wrong signal about the firm’s financial position and performance and make the decision of investing in to company (Messod, 2001). Management are motivated towards increasing earnings management because of getting more debt and equity Financing. b) Income decreasing earnings Management: This process of earnings management is done by decreasing the amount of net earnings. Management is more involved in income decreasing earnings management is to get future compensation like: reducing this month’s earnings by increasing expenses, they ensure the profit from the next month. Also tax avoidance, import tariff rel ief, union negotiations etc. are other reasons for manager’s motivation towards income decreasing earnings management (Messod, 2001). In corporate world these are the types of earning management mostly done by the management: a) Revenue and Expense Recognition Under standard accounting rules, a company must record revenue in its books when it earns that revenue not when it actually receives payment. Similarly, it must record expenses when it incurs them not when it actually pays money. These rules leave room for companies to manipulate their numbers for earnings management (www.budgeting.thenest.com). For example, say a company signs a deal on December 1 to buy $1 million worth advertising time on TV over the next two months. The company could recognize the entire expense in December, recognize the whole thing in January or split the difference. If it records it all in December, then that years profit will be lower by $1 million but the company will get a head start on the next years profit by not having any advertising expenses in January. Profits have been shifted from one year to the next with an accounting t rick. b) Cookie Jar Reserves Companies shift earnings around by creating overly large reserve accounts in good years, then drawing them down in bad years. For example, when a company sells a product with a warranty, it must recognize the estimated expense of honoring that warranty at the same time it books the revenue (www.budgeting.thenest.com). A company might conclude that it incurs warranty costs of $10,000 for every $1 million in sales. If its having a particularly profitable year, it might decide to take a $30,000 warranty expense per $1 million in sales. That builds up a big warranty reserve now so that the company doesnt have to record warranty expenses in the future, thus shifting profits from one period to the other. This tactic goes by the name cookie jar accounting, because it essentially stashes excess profits away to be used when needed. c) The Big Bath There will be times when a company simply cant avoid a bad year. No matter what it does, its going to post a loss because of a sour economy, unfavorable market conditions, and legal trouble, whatever. Some companies, though, deliberately make a bad year even worse by shifting all kinds of expenses, one-time charges and write-offs into that year and shifting revenue out of it. This allows it to inflate profits in future years (www.budgeting.thenest.com). The reasoning behind this strategy is that if the company is going to take a bath, it might as well take a big bath. The companys stock price was going to suffer anyway, the thinking goes, and the damage probably wont be that much worse if the company inflates the loss. Indicators of Earnings Management We have find out five factors which can be important indicators of earnings management: a) Political connection and earnings management: Firms with political connection (large number of stockholder, or CEO or board of directors of the company is a parliament member) are more involved in earnings management (Paul, Mara and David, 2010). Mainly the reasons are- political leaders help the particular firm involved in earnings management to avoid penalization by SEC and also political leaders use these companies’ financial performance and position to increase their public image. b) Internal Audit and earnings management: This one is another major indicator of earnings management. If the quality of internal quality is low there are some possibilities of earnings management. According to the research, if a company is having high quality internal audit, they might be less motivated towards earnings management (Douglas, Jason and David, 2008). Main reasons are: these internal auditors are more professional, responsible towards their job and they barely miss the expert’s expectations. c) Financial transparency and earnings management: Many studies have shown that financial transparency and earnings management are related. If a particular financial report is more transparent then the manager are less interested toward earnings management (James, Robert and Cheri, 2004) The main reason behind this situation is detail information about the accounts including: change in depreciation methods, details about each and every account will help investors to find out any manipulation done by the manager.

Two Sides of Billy Pilgrim in Kurt Vonneguts Slaughterhouse Five :: Slaughterhouse-Five Essays

Two Sides of Billy Pilgrim in Kurt Vonnegut's Slaughterhouse Five War can destroy. War can teach. In Kurt Vonnegut's book Slaughterhouse Five, the central character, Billy Pilgrim, is the outcome of a test. In creating and developing Billy Pilgrim, Vonnegut's intention is to show the effect of modern war on a sensitive person who tries to play the game the way society expects. This, along with family influence, shapes how Billy acts in his two different lives: life in the military and life alone. Torn inside and out, Billy Pilgrim was forced to make a choice. He had to choose the way he would live his life. Learning from his father, Billy could respond by taking his father's drive toward dominance over people and environment. Billy could also follow his mother, confusing him with her excessive demands for gratitude. Forced to decide, Billy chooses neither, which to him, is the easiest way to survive. He yields to his father's attitude without adopting it as a model, while withdrawing from his mother without complaint, without hurting her. He believes that sharing the guilt of aggression is more complicated than simply turning the other cheek, which shines through in moments under pressure. Denial is also crucial to Billy Pilgrim's character. The Dresden bombing intensifies the damage to his personality. He can survive only by denying his experiences at Dresden and he divides himself into two halves: a social half that says, "Yes," and a private half that says, "No." His conflicts force his "surrender to the world," first with a mental breakdown, then with an escape into fantasy. Publicly, he agrees with the Marine major who wants more bombing, more Green Berets, while internally, he sees a war-film backwards, in which he wishes to undo the ravaging effects of war. Looking for an outlet, Billy discovers science fiction, which gives him perspective and consolation. This perspective forces him to teach others, to improve not people's physical sight but their spiritual vision, which eventually leads to his commitment.

Culture and cultural objects Essay

Culture and cultural objects influence every aspect of our daily lives. In fact, cultures can be â€Å"understood as systems of symbols and meanings that even their creators contest, that lack fixed boundaries, that are constantly in flux, and that interact and compete with one another. † (Vaughn and Rotney, 2006) A very important aspect of our cultural lives lies within music, literature, sculpture and other arts, traditions, cinema, and theater. UNESCO (2002) described culture as â€Å"†¦set of distinctive spiritual, material, intellectual and emotional features of society or a social group, and that it encompasses, in addition to art and literature, lifestyles, ways of living together, value systems, traditions and beliefs. † This leads us to conclusion that culture, in its ultimate form, is a set of theoretical and physical objects which symbolize and thus influence every aspect of our daily lives. I have long thought about what these objects might be in the United States of America. As we are a very diverse society and pretty much a melting pot of other nations, there was a wide variety of cultural objects from comic strips to hip hop music that came to my mind. However, I have chosen the cinema of the United States as the topic of my paper. Inmy opinion, our cinema has not only a local but also a global cultural impact which can not be ignored. I will research the history of cinema in the United States and provide specific information in reference to that industry and some of the people who made it a cultural phenomenom in the United States and worldwide. The focus will be on the work of Walt Disney. History of American Cinema American filmmakers have a huge domestic and international audience. As a matter of fact, the United States of America are considered to be a film-making superpower along with a very few other countries worldwide. The main segments in film-making history in United States include the silent film era, the Classical Hollywood era, and the New Hollywood era. In the United States first films were made in New York City, which very fast developed into a movie production center. However, due to relatively high expanses associated with that geographical area, many movie producers began moving west. Due to the fact that sunlight was available almost all year, many of them chose Soutern California as their final destination. During this period movie production peaked and the American public could view the first movies by ways of traveling theaters and storefornt teaters. Only later was the concept of a commercial movie theater as we know it today developed. The first movies were basically low quality pictures with no sound, as the sound was not introduced to the motion picture business until the 1920’s. In the 1920’s began the golden age of motion picture. This is a period of time when movie production peaked and when some of the most famous movies ever have been shot. This happened especially during World War II. Motion Picture studios of that time began creating patriotic movies which had a bonding effect on Americans. This was very usefull during those dangerous and challenging times. One such movie is the now famous picture â€Å"Sargeant York† which presents a typical american farm boy who is called to service and consequently becomes a war hero. The positive conclusions of these movies left the audiances in good mood, longing for more of the same. At the same time, these movies formed a culture which identified itself with the main characters of the particular movie by believing in the patriotic message that they sent. Following World War II many technological developments ensured that the quality and sound of the motion picture became significantly better. The fact that the United States became a global power with military and civilians stationed all over the world also helped with exporting and introducing into new cultures some of the movie products which were produced. Very fast, the United States began developing into an entertainment superpower. American movies and music were sought after all over the world. Over the next few decades we would see movies which had huge impact on culture in United States and elsewhere. Characters such as John Wayne and music stars like Elvis Presley became famous and idolized mainly because of how they were portrayed in the motion picture. Perhaps one of the best known examples is the Star Wars collection of movies. These films are considered to have set the largest cultural bench mark in the film industry. â€Å"Star Wars references are deeply embedded in popular culture; references to the main characters and themes of Star Wars are casually made in American society with the assumption that others will understand the reference. † (Brooker, 2002) Star Wars was one of the productions which entered lives of their fans on an unpresedented scale and in unpresedented ways. It went as far as becoming a religion to some fans in the United Kingdom. In addition to Star Wars and similar movies, people like Walt Disney have created characters and whole industries which affect our culture on a daily basis. Recent history and current developments in the American film industry continue to reinforce the fact that this is one of the most influental industries in respect to the development and expension of American culture. Going to the theater with the whole family still remains one of the most popular activities and a variety of productions ranging from comedies to drama and action movies are available. This implies that this form of entertainment will continue to grow and prosper in United States. But, who are the people who made all this possible and how do they think? The famous and and their effect on culture One of the most famous people in the entertainment world is Walt Disney. Many kids know the names of his characters long before they learn the names of their extended family members. â€Å"Walt Disney was born to Elias Disney an Irish-Canadian, and his mother, Flora Call Disney, who was of German-American descent. His father moved to the United States from Canada after his parents failed at farming there. † (Thomas, 1976) He began his career in Kansas City as an independent cartoonist. Following a fairly successful start he moved to Hollywood where he and his brother opened up a studio and began producing motion pictures. Some of his work from that era includes Alice Comedies and Mickey Mouse. During his career he received multiple Academy Awards as a recognition for his work and dedication. Walt Disney and his work are one of the prime examples of how film (in this case cartoons) can have cultural impact on a domestic as well as international level. The geniality behind Disney’s characters has made them popular all over the world. Even during the hights of cold war, when any contact with the West was forbidden, the children and grown ups in the eastern countries such as Russia knew and enjoyed Walt Disney’s work. â€Å"The popularity of Disney’s products and characters was instantaneous and unmistakable, not only in the U. S. but in other countries. Because of the international distribution of Disney films and the merchandising efforts that accompanied them, the Disney Company developed a reputation that was magnified far beyond the relatively small company’s resources. And that reputation has continued. † (Wasko, 2000) Thanks to motion picture, Disney Company has grown and developed into a giant that operates in several industries including theme parks, hotels, travel, film productions, and TV. Even today, many years after his death, we can see the impacts of his work. Literally everybody know about Mickey Mouse and other of his characters and it is very common that today’s grand parents have enjoyed the same cartoons when they were children as their grandchildren today. This is the extent of cultural impact and legacy that people like Walt Disney have left us through filmmaking. This is visible through his companies’ success. â€Å"As of 2007, the company has annual revenue of over U. S. $35 billion. † (Walt Disney Company, 2008) The ability to effectively tell stories is one of the most crucial gifts that a film producer has to have. Depending what kind of film is being produced, the message can be different. This is why it becomes increasingly important to understand what this message and convey through picture to the public. This is equally important to success of comedies such as Shreck or to success of more serious movies portraying accurate historical facts. In addition to being an effective story teller, technology plays a huge role in todays movies. We can see plane crashes, car accidents, war scenes, as well as animated movies which appear extremely real. This is largely possible due to significant advances which were achieved in computer technology and robotics. Many of these innovations can be seen and reviewed in various theme parks and movie studios. In recent years a new form of film has been breaking through – and that fairly successfully. Movies such as Shreck, Cars, and other animated features are setting new standards. â€Å"Relevant data show that the annual output value of animation products and their derivative products in the United States, the largest exporter of entertainment products in the world at present, has amounted to over US$5 billion. † (Fang, 2008) However, not only new movies are popular. Thanks to animation, we have seen the rebirth of old classics in ways that are hard to believe. Conclusion Film making industry in the United States of America has left a lasting cultural impact, not only on the United States but also on the rest of the world. As a main exporter of entertainment we have created a cuture that feeds and grows on excellent made movies of all genres as well as traditional cartoons such as those of Walt Disney. As a matter of fact, people with visions, such as Walt Disney, have created a cultural revolution in the United States and worldwide. Children and grown ups across the world are familiar with American characters such as Mickey Mouse to the point that they have adopted this amerian icon as their own. The characters of these movies are having huge impacts on other industruies as well. It is a well known fact that once apopular movie such as for example â€Å"Spiderman† comes out, T-shirts, shoes, lunch boxes, bysicles, and other items with character imprints will follow in order to profit from the popularity of the movie characters. This also indiactes that film has as much impact on our overall economy as it had on our culture. Today’s trends are indicating tha this will continue. We hear almost on a monthly basis about new blockbusters which bring in hundreds of millions of dollars in the offices. Another indirect impact that the movie-making industry has on us is through the actors. Some of the actors are extremely popular and many people lkisten tow hat they have to say in reference to current politics and all other issues worldwide. This has created a very powerfull tool for the film industry as the owners and actors can have significant effect on public opinion. This has been demonstrated very recently in San Francisco, California during the demonstrations against the Chinese human rights violations in Tibet. The famous actor Rishard Gere was one of the initiators of the very successful protests. Other examples include many actors such as Arnold Swarzeneger who entered public service after Hollywood and became quite succesful, largely thanks to their fame. One could easily say that by being part of the film-making industry in United States, one becomes a part of the most powerful propaganda machine in the world. References Findley, Carther Vaughn and John Alexander Rothney (2006). Twentieth-century World. Sixth edition, p. 14. UNESCO. 2002. Universal Declaration on Cultural Diversity. Information retrieved on April, 25th 2008 from http://portal. unesco. org/ Brooker, Will (2002). Using the Force: Creativity, Community, and Star Wars Fans, Continuum International Publishing Group Wasko, Jean (2000). How Mickey Converged on America. Information retrieved on April, 25th 2008 from http://flash. uoregon. edu/W00/mickey. html Thomas, Bob (1976,1994). Walt Disney: An American Original. New York: Hyperion Walt Disney Company (2008). Financial Information. Walt Disney Corporate Website. Information retrieved on April 25th, 2008 from http://corporate. disney. go. com Ai Fang and Wang Xiao (2008). China making breakthrough advances in animation industry. Information retrieved from China Economic Net Website http://en. ce. cn/Insight/200804/17/t20080417_15183331. shtml

Case Analysis County Department Of Public Health Essay

Case Analysis 2 Topic 2 Contingency Analysis County Department of Public Health Introduction The structure and organization of the division of Penville County Department of Public Health (CDPH) has been changed by Dr. William Brown in 2004. Penville County was a large county in terms of population size and was also growing rapidly. Before early 2004, Dr. Brown was concerned that the leadership of the EPI/BDPR division was not able to build an organization that would adequately prepare Penville County for a large health emergency. So he wanted to create a new EPI/BDPR division which was optimally prepared for any chemical, physical, or biological emergencies. Besides the leadership problems, there were four major organizational problems leading to the lack of progress in preparedness, human resources factors, process issues, relationships with key external agencies, and technology issues. Both leadership and organizational problems gave big challenges to Dr. Brown to reorganize CDPH. This paper will analyze the contingency theorists with the CDPH’s problems internally and between organization and environment. Analysis 1. Organization’s Environment The anthrax attacks of 2001 exposed serious inadequacies in the response of the U.S. public health system to meet such grave threats. The federal government passed the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 and appropriated funds to develop the public health infrastructure. Since 2002, Dr.Show MoreRelatedNational Notifiable Diseases Surveillance System1737 Words   |  7 Pagesare involved with state and local health departments is the National Notifiable Diseases Surveillance System (NNDSS), which is a nationwide collaboration that allows local, state, territorial, federal, and international health agencies to share information about disease-related issues. 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