Question

What was the technique used by healthsouth to smooth earnings? multiple choice question.

O capitalizing costs that should have been expensed
O altering contractual allowances
O channel stuffing
O padding health care billings

Answer 1

HealthSouth used the technique of capitalizing costs that should have been expensed to smooth earnings, which allowed them to spread out costs and misrepresent financial health.

Step-by-step explanation:

The technique used by HealthSouth to smooth earnings was capitalizing costs that should have been expensed. Rather than following standard accounting procedures, they opted to manipulate their financial statements by turning what should have been immediate expenses into long-term assets. This financial maneuver spread out costs over a longer period and as a result, did not impact earnings as dramatically in the short term.

This is fundamentally an accounting practice issue where companies choose to improperly defer expenses to make their financial health appear stronger than it actually is.