Which of the following reasons would management use to justify overstating performance in the financial statements?
A) To decrease taxes owed
B) To defer earnings to subsequent periods if current goals have been met
C) To reduce investors' current expectations to create a perception of growth in the future
D) To meet benchmarks for performance-based compensation

Question

Quizplus · Accepted Answer

Overstating performance in financial statements can be motivated by the desire to meet or exceed benchmarks that are tied to performance-based compensation. This can make the company appear more profitable or successful than it actually is, potentially leading to higher bonuses or stock options for executives and managers.

Which of the Following Reasons Would Management Use to Justify