Question

Assume there is a large firm operating in the telecommunications sector. For many years now, this firm has reported very large earnings in its income statement, which has not gone unnoticed. In particular, the media has been very quick to criticise the level of the firm’s reported earnings. However, in the current year, the firm reports a significantly lower earnings than previous years.

Required

Referring to your lecture notes, discuss a hypothesis (or an argument) that you are familiar with on the theory of accounting choices that could explain this situation.

(The andwer alreadh avaialble on chegg is wrong. so please dont copy that. thanks)

Answer 1

ANSWER ;

1. the tele communition is the high quality of the company representation earned actually, few earnings non - GAAP earnings adjustmemts, the company earnings recongnations strategy.

these earnings recongnations stratiges is very industry in the company, this stratiges will be calculated EPS.

EPS is the very higer quality of the company they mangement incressings the margins.

THE higer expenses a lot non of the non -GAAP adjustments and uncessary changes low qualty of EPS reports.

working out side of the standard for revenue recongnations some times lead to ariseing the management problems such cases of the enron world com.

2, EPS is the by product of the company earnings, looking at the

1 income statememts

2 gross margin

3 operating margin

4 net margin

3, a company EPS provides the bottom earnings result for the company one of the key measures performance is the company on annuval basis