Essay on Earnings Quality and Financial Reporting

Essay on Earnings Quality and Financial Reporting

You must submit the case in class in printed format and electronically via SAFEASSIGN available through Blackboard.
Students are expected to submit their assignments to SAFEASSIGN prior to submitting their assignments to the professor. Failure to properly cite the writing of others or submission of work of others as your own is a serious Honor Code violation. Please read carefully the guidelines on avoiding plagiarism listed below.
When writing up your case assignment, you must appropriately cite accounting guidance which support your arguments. Your memo should be substantive in nature and to the point. However, the discussion should be thoughtful and well developed. Answers, even if correct, without sufficient discussion and thoughtful analysis are not sufficient.
Please use the following page formatting for the assignment:
1. One-inch margins
2. Double-spacing
3. Size 12 Times New Roman font

Your write up should have the following sections:
1. Cover Page
a. Name
b. Class title and section number
c. Due date
2. Executive summary (a one or two paragraph condensed description of the issue and your suggested solution)
3. Analysis:
a. Description of the issue (facts)
b. Analysis of facts
4. Conclusion
5. References (can also be included in the footnotes).

The assignment length should be 2 to 3 pages, excluding cover page and references, with double spacing.
Grading policy:
The assignment will be graded on the following two criteria:
1. Content – Original thinking and an ability to focus on the issue and the relevance of your discussion and adherence to report requirements (worth 10 points).
2. Communication – Quality of writing including language, spelling (worth 10 points).

For each of the aforementioned criteria, you will earn the following points on each based on the assessment: Highly competent – 10 points, Competent – 8 points, Marginally Competent – 5 points, Not Competent – 0 points.
Apply your critical-thinking ability to the knowledge you’ve gained. These cases will provide you an opportunity to develop your research. Analysis, judgment, and communication skills. You also will work with other students, integrate what you’ve learned, apply it in real-world situations, and consider its global and ethical ramifications. This practice will broaden your knowledge and further develop your decision-making abilities.
The financial community in the USA has become increasingly concerned with the quality of reported company earnings.
1) Define the term earnings quality.
2) Explain the distinction between permanent and temporary earnings as it relates to the concept of earning quality.
3) How do earnings management practices affect the quality of earnings?
4) Assume that a manufacturing company’s annual income statement included a large gain from the sale of investment securities. What factors would you consider in determining whether or not this gain should be included in an assessment of the company’s permanent earnings?


We often hear the word earnings in the business community, and are easily referred as to the income of company or the amount that the operation has accumulated over the period.

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