The one-time overstatement of restructuring charges to reduce assets, which reduces future expenses, is the definition of which of the following earnings management techniques?
A) Taking a bath
B) Creative acquisition accounting
C) Creasing "cookie jar" reserves
D) Abusing the materiality concept

Question

The one-time overstatement of restructuring charges to reduce assets, which reduces future expenses, is the definition of which of the following earnings management techniques? 
A) Taking a bath
B) Creative acquisition accounting
C) Creasing "cookie jar" reserves
D) Abusing the materiality concept

Quizplus · Accepted Answer

The one-time overstatement of restructuring charges to reduce assets, which reduces future expenses, is known as "taking a bath." This technique involves deliberately overstating expenses in the current period to create a reserve for future expenses that can be drawn from in later periods, artificially boosting earnings in those periods. The other options (B, C, and D) do not fit this specific description.

The One-Time Overstatement of Restructuring Charges to Reduce Assets, Which