CFA Practice Question

There are 90 practice questions for this study session.

CFA Practice Question

The SEC alleged that from 2002 to 2006 computer giant Dell created special reserves through undisclosed payments that Dell received from chip giant Intel in return for agreeing to use Intel's CPU chips exclusively in its computers. The SEC maintained that Dell would have missed analysts' earnings estimates in every quarter during the period had it not dipped into these reserves to cover shortfalls in its operating results. In July 2010 Dell agreed to pay a $100 million penalty to settle SEC allegations. This account practice is typically referred to as ______.
A. Cookie jar accounting
B. Tyco scandal
C. Undisclosed related transactions
Explanation: Cookie jar accounting is used by a company to smooth out volatility in its financial results, thus giving investors the misleading impression that it is consistently meeting earnings targets.

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