Wiw do companies find it corvenient to alter allowance for bad debts to manage earnings? The Sarbanes-Oxley Act has closed off all other loopholes used to manage earnings. It is one of the options that offers the greatest benefit to a company. GAAP prescribes a range of allowances for bad debts for each industry and management can choose any mumber within that range Bad debt allowance is an estimate and can be justified based on management's discretion or opinion under GAAP