The Matrix Format Income Statement case study allows you to explore the issue of earnings management and its impact on the transparency and understandability of reported financial results. Part A of the case demonstrates the impact of a commonly used accounting treatment for available‐for‐sale investments (presentation in the statement of changes in equity and recycling of fair value changes) on users' ability to extract decision‐useful information. Part B investigates the effect on transparency and understandability of the same financial information when a different presentation and measurement approach, known as the matrix format income statement, is used.

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