A version of earnings management that became common in the 1990s was
A)when management makes changes in the operations of the firm to ensure that earnings do not increase or decrease too rapidly.
B)reporting "pro forma earnings".
C)when management makes changes in the operations of the firm to ensure that earnings do not increase too rapidly.
D)when management makes changes in the operations of the firm to ensure that earnings do not decrease too rapidly.
E)none of the above.

Question

Quizplus · Accepted Answer

Reporting "pro forma earnings" became a common form of earnings management in the 1990s. Pro forma earnings are a company's calculated earnings that exclude certain expenses or one-time charges that may negatively impact reported earnings. This allows companies to present a more favorable picture of their financial performance to investors and analysts. However, pro forma earnings can be misleading and do not follow generally accepted accounting principles (GAAP).

A Version of Earnings Management That Became Common in the 1990s