Balance Sheet Restrictions on Current Earnings Manipulation

With respect to motivation,earnings management constraints study is relatively lack,and most of them are outside the financial reporting process.This article presents an interesting feature between income statement and balance sheet when management manipulates profits based on accruals.Earnings management continues accumulation to form the opening net operating assets in the balance sheet.The study found that,relative to the fair application of accounting standards,managers' optimistic bias reporting surplus ability reduce with the increase in the extent of net assets overestimate.This study further proves that given overvaluation of opening balance sheet,net operating assets,earning management constraint also depend on the speed of the accruals reversal.