Within the GAAP framework:
A) Managers may smooth earnings to show investors that firm assets are growing.
B) Managers may take steps to over or understate earnings.
C) Both A and B are possible
D) None of the above.

Question

Quizplus · Accepted Answer

Under GAAP, while not explicitly encouraged, earnings management practices can occur, where managers might smooth earnings or manipulate them to present a certain financial health of the company. This doesn't mean it's compliant with ethical standards, but it's a possibility within the framework.

Within the GAAP Framework