One technique to smooth income is to increase the value of inventory and other assets of an acquired company at the time of the acquisition, resulting in lower earnings when the assets are later sold.

Question

Quizplus · Accepted Answer

Increasing the value of inventory and other assets at the time of acquisition would result in higher earnings when the assets are later sold, not lower, because the cost basis of the assets would be higher, reducing the gain (or increasing the loss) on sale.

One Technique to Smooth Income Is to Increase the Value