Earnings management refers to the deliberate actions of corporate management to change the financial information that would inflate or ensure consistent results.

a)State and explain twomotivating factors for corporate management for the earnings management?

b)State two (2) disadvantages of earnings management from the stakeholders' point of view.

c)Explain how an audit committee of a business may detect and control earnings management.

d)The recognition criteria of intangible assets are the same as those of PPE. However, restrictions are applied as per the provisions of AASB 138.

You are the Finance Manager of Link Limited. Your accountant seeks your help to account for the following items in preparing the financial statements.

$

Cost of purchase of trademark

6,500

Cost internally generated patent

10,000

Cost of lawsuit to protect internally generated patent

2,600

Goodwill assessed by the senior management

10,000

Goodwill acquired in combining with Mink limited

12,000

Cost of engineering activity to advance the design of a product to the manufacturing stage

26,000

Required:State whether each of the above items can be/ cannot be recognised as an intangible asset (IA) in the Link Limited's balance sheet. Give reasons for your answer