What are some ways in which earnings management on construction contracts can be prevented?
A)Determining the degree of completion in a manner that best represents the underlying performance of the project.
B)Judiciously making estimates for the cost-to-cost approach that maximize earnings in the current year.
C)Underestimating future costs.
D)Not using engineering estimates or the cost-to-cost approach.

Question

Quizplus · Accepted Answer

Determining the degree of completion in a manner that accurately reflects the project's actual performance can prevent earnings management on construction contracts. This involves using objective criteria to assess the percentage of work completed and the amount of revenue that can be recognized.

What Are Some Ways in Which Earnings Management on Construction