Managing earnings by "gains trading" is easier to do when a company uses historical cost accounting than when it uses fair value to account for its assets.

Question

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With historical cost accounting, the value of assets is based on their original cost and not the market value, making it easier for companies to manipulate their earnings by gains trading. However, with fair value accounting, the value of assets is constantly updated to reflect their current market value, making it harder for companies to manipulate earnings through gains trading.

Managing Earnings by "Gains Trading" Is Easier to Do When