The Robert's Resort chain of hotels needs to renegotiate the union contract with the powerful Hotel Workers of Canada Union every other year.Although the hotels in the chain are all successful, labour costs are a major expense for the business, and management wants to ensure that the company remains profitable.Which one of the following earnings management techniques might the Robert's Resort management be using?

Question

Quizplus · Accepted Answer

Managing earnings to decrease income could be a strategy used by Robert's Resort management during the period of renegotiating the union contract. By showing lower profits, the company might aim to negotiate more favorable terms with the union by arguing that high labor costs could harm the company's financial health.

The Robert's Resort Chain of Hotels Needs to Renegotiate the Union