Course 8 - Earnings Management (Video) (Course Id 1905)

• Who is this course for?
  This course is designed for anyone in need of Continuing Professional Education (CPE), particularly accounting professionals who want to understand how earnings management is identified and analyzed in financial reporting.

• What is this course about or what problem does this course solve?
  The course explains and illustrates real and accrual-based earnings management, helping professionals recognize where and why it is practiced and understand the implications for financial statement analysis.

• How can the knowledge from this course be used?
  Learners will be able to identify earnings management strategies within financial statements, differentiate between real and accrual practices, and assess company transparency and ethical boundaries in reporting.

• Why is this course important to a CPA, Accountant, or IRS Enrolled Agent?
  Understanding earnings management is crucial for CPAs to ensure accurate financial analysis, assess risk, detect manipulation, and maintain the integrity of financial reporting for stakeholders.

• When is this course relevant or timely?
  This course is especially timely in today’s environment where scrutiny of financial transparency and ethical reporting is critical, and earnings management practices are common in many industries.

• How is a course like this consumed or used?
  It is delivered as a NASBA QAS self-study video course with no prerequisites, includes interactive review and final exam questions, and grants 2.0 CPE credits with a passing score of 70%.

This course is the final course in the 8-course series on financial reporting and analysis offered by PRATTedu.  In this single video course, Professor Pratt first defines earnings management and then introduces and illustrates the two basic forms: real earnings management and accruals earnings management.  He illustrates each form, provides a number of examples, discusses whether they are appropriate and then creates a framework for accruals earnings management that identifies and relates the four general areas (materiality, disclosure, classification and measurement) where it is practiced.  The video concludes with a thorough discussion of why earnings management is practiced and common strategies used by companies.  Throughout the video real-world financial statements and footnotes are analyzed. Companies featured include General Electric, Merck, Harley Davidson, Tesla, AT&T, Volkswagen, Walt Disney and others.

Video - NASBA QAS - Text - NASBA Registry - 1905

Course Learning Objectives

• Define earnings management.
• Differentiate between real earnings management and accruals earnings management.
• Identify the four general areas where accruals earnings management is practiced and be able to recognize examples of each.
• Explain why earnings management is practiced.
• List and identify the popular strategies used by companies to practice earnings management.

1. Define earnings management.
2. Differentiate:
a. Real earnings management
b. Accrual earnings management
3. Identify and illustrate general areas where accruals earnings management is practiced.
a. Materiality
b. Disclosure
c. Classification
(1) Operating vs. non-operating
(2) Debt vs. equity
(3) Short-term vs. long-term
d. Measurement
(1) Revenue recognition and matching
(2) Valuation of assets and liabilities
4. Why is earnings management practiced?
5. List and identify common earnings management strategies
a. Overstate current earnings
b. Understate current earnings
(1) Build hidden reserves
(2) Take a bath
c. Off-balance sheet financing

Chapter 1 - Earnings Management

Chapter 1 Review Questions

Glossary