Discuss the role of management in relevant circumstances.
What will be an ideal response?
ANSWER:
Managerial influence has been regarded as an important consideration in terms of allowing different accounting methods based on relevant circumstances. However, there is a problem in that the selection of accounting methods might be guided by motives such as:
(1) Maximizing short-run reported income if managerial compensation is based on it
(2) Minimizing short-run reported income if there is fear of governmental intervention on antitrust grounds
(3) Smoothing income if it is believed that stockholders perceive the firm as having a lower amount of risk than would be the case if greater fluctuations of earnings were present
Because management is potentially capable of distorting income measurements, limiting relevant circumstances to elements beyond managerial control has been suggested.
You might also like to view...
Questions such as "Why should a construction project lease Caterpillar equipment instead of Kamatsu?" and "What are the advantages of the Toyota Camry over the Honda Accord, and vice versa?" are related to which of the following capabilities of promotion?
A. to take action B. to inform C. to remind D. to persuade E. to sell
Performance improvement goals are appropriate when
a. The employee's behavior is stellar b. The employee does not have the skills to do the job c. The employee has a bad attitude d. The employee's behavior must change
Most people obtain health insurance through group plans offered by employers
Indicate whether the statement is true or false.
Rather than demonstrating the effects of illumination, the Hawthorne studies result found that ______.
A. the meaning of a change is likely to be as important as the change itself B. the actual change was paramount C. change in illumination was important D. none of these