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(a) Parfet argued in Subjectivity and Earnings Management: A Preparer Perspective (2000) that the primary goals of earnings management were reporting stable, positive earnings growth
(a) Parfet argued in "Subjectivity and Earnings Management: A Preparer Perspective" (2000) that the "primary goals of earnings management" were "reporting stable, positive earnings growth to meet market expectations in terms of EPS". Parfet identified two methods of earnings management: i) Operational earnings management. (ii) Improper earnings management through fraudulent or artificial means. Show how these two methods differ by giving examples of how each method may be applied (b) (b) The IFRS plans to bring back the prudence principle which they define as "the exercise of caution when making judgements under conditions of uncertainty" and "means that assets and income are not overstated and liabilities and expenses are not understated". Discuss whether it is ever possible to produce "neutral" financial statements that give a "true and fair view" and whether giving management authority to introduce a bias towards conservatism" in this way is in owners' interests (c) (c) The US LIFO Coalition claims that the "repeal of LIFO would significantly and permanently harm broad sectors of America's economy, endangering the viability of thousands of businesses and the livelihood of their employees and their families... Recapturing up to 70 years of (deferred) income simply in search of additional revenue to fund other tax priorities is unfair, and is unjustified." Argue the case for the prohibition of the use of LIFO by US oil companies made by the opponents of the US LIFO Coalition, countering the arguments put forward by those who favour its retention (d) (d) In the event of a firm being put into liquidation many creditors often receive only a small fraction of what they are owed (if anything at all). Explain why this is so often the case
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