Problem
Read the article entitled "Lies, Damned Lies, and Managed Earnings The crackdown is here".
In one part of the article, Harvey Goldschmid makes a couple of comments regarding "cookie jar reserves". Explain to an unsophisticated investor what Goldschmid is saying. For example:
a) Why would it be more difficult to fairly value a company? Consider how earnings are used in valuations of businesses. Etc.
b) What does he mean by "dim the signals"? What signals do financial statements give? How would a user identify such signals in financial statements? How do "cookie jar reserves" dim those signals? Etc.