Question $2$

In a budget$-$based compensation scheme, many managers are rewarded based on their performance relative to budgeted targets. However, such schemes may make the managers want to shift income from the current period to a future period, especially when performance is expected to exceed $120\%$ of the budgeted target.

Explain why a manager might be motivated to shift income from the current period to a future period under such a scheme.

$(10$ Marks$)$