Upon reading the notes to the financial statements of KAR Ltd., you notice that the policies they have chosen tend to be deferring and amortizing both revenue and expenses.This approach leads you to believe that KAR Ltd.is employing a(n):
A)Income tax minimization strategy.
B)Profit maximization strategy.
C)Smoothing strategy.
D)Income tax maximization strategy.

Question

Quizplus · Accepted Answer

Deferring and amortizing both revenue and expenses is a technique used in earnings management to smooth out fluctuations in financial results over time, making earnings appear more stable and predictable. This approach is known as a smoothing strategy, aiming to present the company in a more favorable light to investors and analysts by reducing the appearance of volatility in its financial performance.

Upon Reading the Notes to the Financial Statements of KAR