General Electric, Matell, NationsBank, and W. R. Grace are among companies recently under scrutiny for managing their earnings. This case uses a fictitious data set to simulate a decision environment in which earnings are managed in the context of accounting for investments in marketable securities. Decisions are made from the perspective of management interests and other stakeholders, the FASB's conceptual framework, and GAAP. These competing interests may lead to inconsistent conclusions. As a result, proper analysis of the issues and framing of defensible positions requires more than application of professional accounting standards. Resolution of conflicts of interest is made using appropriate ethical analysis based upon a philosophical framework of Utilitarian‐Theory, Rights‐Theory and Justice‐Theory.

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