Accounting income has elements of both permanent income and economic income. Explain this statement.
Answer to relevant QuestionsDetermining core income is an important first step to estimating permanent income. Explain. What adjustments to net income should be made for estimating core income?Explain the hierarchy of inputs used in determining fair values. The use of which level of input lowers the reliability of fair value estimates?Explain how accounting concepts and standards, and the financial statements based on them, are subject to the pervasive influence of individual judgments and incentives.Identify and explain three types of earnings management that can reduce earnings quality.Distinguish between the permanent and transitory components of income. Cite an example of each, and discuss how each component affects analysis.
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