Investment professionals frequently develop concerns that earnings management may be present when they observe that a firm has voluntarily changed its inventory valuation policy from LIFO to FIFO. Similar concerns arise when the capital market discovers that a firm using LIFO is liquidating its inventory prices layers. Discuss why these two financial statement disclosures might indicate the presence of earnings management. Discuss when these disclosures might not indicate the presence of earnings management.

Answer rating: 100% (QA)

Earnings management means displaying a positive view and higher level of financial performance in th... View the full answer