TRISAKTI UNIVERSITY

TUGAS 
9.2 CASE STUDY, 9.13, 9.16, 9.22

MELINA SYAFITRI

023001801064

Special Topic In Accounting

Dr. Susi Dwi Mulyani, Ak, MM

Application Questions

9.13
A. Revenue recognition from services
 Conservative :
Services are prepaid and performed in full

 Moderate : Services prepaid and partially performed

 Aggressive : Services are agreed to but not yet performed

 Fraud : Non-current assets are impaired but no impairment loss recorded

B. Intagible Assets
 Conservative : Regularly impair, do not revalue even in an active market

 Moderate : Slow to record impairment losses

 Aggressive : Revalue intangibles even when no active market

 Fraud : Non-current assets are impaired but no impairment loss recorded

C. Impairment of non-current assets
 Conservative : Conservative impairment policy used

 Moderate : Slow to record impairment losses

 Aggressive : Non-current assets are impaired but no impairment loss recorded

 Fraud : Non-current assets are impaired but no impairment loss recorded

D. Revaluation of non current assets

 Conservative : Use cost basis of accounting

 Moderate : Record revaluations annually using generous valuations

 Aggressive : Non-current assets are impaired but no impairment loss recorded

 Fraud : Non-current assets are impaired but no impairment loss recorded

9.16
Outline common techniques used to manage or manipulate earnings:
There is a range of techniques analysts can use to examine financial data to detect
earnings management. A number of these are outlined in Contemporary Issue 9.1.
These can include:
Examine trend in profit results – the analyst should be able to determine if profits are
consistent, and growing gradually over time, or if they vary significantly from one year to the
next. Analysts can also access half yearly, and sometimes quarterly data that can assist in
this assessment. Is the company subject to seasonal variations? Are they meeting forecasts
on a half yearly basis?
Operating/non-operating mix – analysts need to determine which part of the business is
generating profits. If earnings are being generated through non-recurring items such as gain
on sale of fixed assets, rather than current operations, it may indicate a problem with
meeting earnings forecasts and continued increases in earnings.

Earnings base – analysts should examine from where the company sources earnings. If they
are spread across a number of operations or sectors there is a higher likelihood of longer-
term success than if the company relies on only one operation, or even one
major customer.

9.22
Ethical business owners and managers should be familiar with the techniques of earnings
management so they can recognize it when it occurs.
• Revenue and Expense Recognition.
To increase earnings in the current period, the company can recognize future
revenue prematurely -- before that revenue has been fully earned
• "Cookie Jar" Accounting.
Accounting rules require companies to recognize future expenses at the time they
recognize the revenue associated with those expenses. For example, when a
company sells an item with a warranty, it must estimate its future warranty costs
and recognize that expense at the time it makes the sale.
• Changing Accounting Methods.
In many areas of business bookkeeping, accounting standards allow companies to
choose the reporting method that works best for them. Examples include the system
the company uses to account for the value of its inventory and the schedule it uses
to depreciate its capital assets.
• One-Time Charges.
for example, or significantly reducing the value of an asset on the balance sheet.
Companies that practice earnings management may try to "save" these charges for a
time when earnings are high enough to absorb the hit or take the charges
prematurely if current earnings are high.