Nichols and Whalen (2004) replicate and confirm the results of a study by Bernard and Thomas (1989) that seems to indicate that the capital market response to quarterly earnings announcements disregards systematic components of earnings that should not be disregarded if the market is efficient. Meanwhile, Nelson et al. (2003) and other groups of researchers have demonstrated that corporate managers manipulate accounting data while acting in their own self-interest. What steps can regulators take to address this situation while meeting the goal of relevant and representationally faithful information and the overarching goal of financial reporting presented in SFAC8, chapter 1? Should these strategies reflect more or less rigidly uniform financial reporting rules (see Wolk et al, Ch. 9)?