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1)Why would an accountant be motivated to shift profits into next reporting period if current targets are met?
2)What happens when provisions are over-stated and how is it related to shifting profits from one period to another?Likewise what would be the impact if provisions are under-stated?
Problem arises if you exceed your targets in current year but expect to fall short of them in next year.
Year 1 – Dr P&L Cr Provision for reorganisation
Year 2 – Dr Provision Cr P&L, announcing that you have cancelled the reorganisationAlso easy to understate provision and expense the balance of the costs in the next year.
So, from my understanding from your reply is that, accountant be motivated to shift profits into next reporting period if it expects to not meet target next year.Then how does this affect/undermine integrity and objectivity of an accountant?
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