What are some ways in which earnings management on construction contracts can be minimized?
A)Determining the degree of completion in a manner that best represents the underlying performance of the project.
B)Judiciously making estimates for the cost-to-cost approach that maximize earnings in the current year.
C)Underestimating future costs.
D)Not using engineering estimates or the cost-to-cost approach.

Question

Quizplus · Accepted Answer

Determining the degree of completion based on the actual performance of the project rather than manipulating estimates can help minimize earnings management. Using a reputable and objective method to measure completion, such as the percentage of work completed, can also help ensure accurate reporting. The other options listed, such as manipulative estimates, underestimating costs, and not using reliable estimates or methods, can all lead to earnings management and should be avoided.

What Are Some Ways in Which Earnings Management on Construction