This case simultaneously examines pension accounting and earnings management. It is designed around a real-world company although the company name in the case is fictional. Several key concepts are demonstrated in this case: earnings management incentives, earnings management techniques, pension accounting, and accounting choice. Pension accounting involves several accounting estimates and choices. This case demonstrates how and why managers might make these choices opportunistically to manage earnings. Also, pension accounting is a difficult topic. Thus, learning the concepts in the case format provides a stronger frame of reference for the various concepts and mechanics involved in the calculation of pension expense, the reported pension asset or liability on the balance sheet, and the economic pension asset or liability. Finally, the case provides an excellent frame of reference for understanding how earnings can be managed and why managers might wish to manage earnings.


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