Firms that recognize revenue early or postpone recognition of expenses often have a lower quality of earnings.

Question

Quizplus · Accepted Answer

Recognizing revenue early or postponing expenses can artificially inflate a company's financial results, making their earnings appear higher than they actually are. This can lead to a lower quality of earnings, as investors may question the sustainability and accuracy of the reported earnings.

Firms That Recognize Revenue Early or Postpone Recognition of Expenses