The practice of shifting income from good years to poor years in order to show a record of steady growth is
A)known as earnings management and is considered unethical.
B)highly recommended but not required by GAAP.
C)a basic requirement of accrual accounting.
D)impossible if Generally Accepted Accounting Principles are followed.

Question

Quizplus · Accepted Answer

The practice described is known as earnings management and is considered unethical. It involves manipulating financial statements to portray a false image of financial health, which goes against the principles of transparency and accuracy in financial reporting. While accrual accounting does involve some degree of income shifting, it must be done in accordance with GAAP, and not for the purpose of misleading stakeholders.

The Practice of Shifting Income from Good Years to Poor