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Which method for earnings management is following the GAAP feasibility and without commuting the fraud?

Which method for earnings management is following the GAAP feasibility and without commuting the fraud?
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Answer #1

The required method is revenue recognition.

In this method all revenues by selling of goods or providing services are recognized in accounts if their respective performance obligations are complete. An example of performance obligation is delivery of goods to the customer’s warehouse; once this is done the amount of such delivery should be considered as revenue during that period, although it is done on credit and no cash has been collected. This is the accrual basis of accounting, which supports the Generally Accepted Accounting Principles (GAAP).

Such method removes the chance of fraud. The probable fraud if this method is not applied is that the marketing manager may include any figure in the amount of sale for fulfilling his/her target of selling and then can earn commission out of it.

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