Question: The firms in Healy s study of earnings management Section 11 3
The firms in Healy’s study of earnings management (Section 11.3) would have been using the historical cost basis of accounting. Given that accounting standards have moved to increased use of fair value accounting for financial instruments, as described in Sections 7.4, 7.5, and 7.9, would this move to fair value increase or decrease the potential for opportunistic earnings management for bonus purposes? Explain.
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