Generally Accepted Accounting Principles, or GAAP as they are often called, give management a lot of leeway in determining how to report earnings to shareholders. At times, a company may opt to change the way it has accounted for a particular item in the past, which may result in increasing or decreasing the reported profits despite the company actually being in the identical economic position.
What prompts organisations to change reporting patterns and how does this affect the shareholder value?
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