CFA Practice Question

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CFA Practice Question

What are the areas where a company can manipulate numbers to create cookie jar reserve accounting?

I. One-time charges
II. Special items
III. Unrealistic assumptions to estimate liabilities
A. I and II
B. II and III
C. I, II and III
Explanation: A company can manipulate numbers to create cookie jar reserves in all of these areas.

Cookie jar reserve accounting: Companies create bigger-than-needed reserves during good economic times so they can reach into them when needed in the bad times and thereby make it seem like they've got steady sales and earnings growth.

User Contributed Comments 1

User Comment
NOBA very interesting - cookie jar accounting and cookie jar reserve!
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