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Basic Question 4 of 7
If a CEO concludes that the minimum earnings targets can't be made in a given year, he/she will have an incentive to move earnings from the present to the future, since the CEO's compensation doesn't change whether he/she misses the targets by a little or a lot. By shifting profits forward - by prepaying expenses, taking write-offs and/or delaying the realization of revenues - the CEO increases the chances of getting a large bonus the following year. Which biased accounting practice could be used by the CEO to achieve this?
B. Income boosting
C. Big bath
A. Cookie jar reserves
B. Income boosting
C. Big bath
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
describe a spectrum for assessing financial reporting quality
explain the difference between conservative and aggressive accounting
CFA® 2025 Level I Curriculum, Volume 3, Module 10.