Forbes (June 20, 1994) reports: Yes, there are hidden reserves in Switzerland, Germany and Sweden. But that
Question:
Forbes (June 20, 1994) reports: “Yes, there are hidden reserves in Switzerland, Germany and Sweden. But that doesn’t mean that there is more to these companies than meets the eye. Loosey-goosey reserves cut both ways. They could mean that a company’s book value is understated. But they could also mean that the company’s earnings are overstated. Reserves tucked away in earlier years could have been used to paper over last year’s losses.” REQUIRED: Explain the meaning of this quote, and provide several examples of how “conservative” report¬ ing in a previous year may allow for “liberal” reporting in a future year. When viewed in this way “conservative reporting” is actually part of a more general reporting strategy. Name that strategy.
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