A Company showed a large restructuring charge on its income statement in 2014 and has experienced a constantly rising earnings trend since that time.This would most nearly represent an example of
A) cookie jar reserves.
B) big bath accounting.
C) creative acquisition accounting.
D) using immaterial transactions to increase reported earnings to meet analysts' expectations.

Question

Quizplus · Accepted Answer

Big bath accounting refers to the practice of a company taking a large write-down or restructuring charge in a single period in order to clean up its balance sheet and reset earnings expectations. This can also result in a boost to future earnings as the company is able to report improved performance after having taken the large charge.

A Company Showed a Large Restructuring Charge on Its Income