Final answer:
The direct answer is that the manipulation tactic mentioned by Bruns and Merchant is accelerating discretionary repairs to an earlier period. This is a strategy to adjust the timing of expenses to influence financial reporting and manage earnings, though it can lead to ethical and transparency issues.
Step-by-step explanation:
The example given by Bruns and Merchant of using operating decisions to manipulate earnings is accelerating the making of discretionary repairs to an earlier period. Such action can be used to manipulate financial statements, shifting expenses to a period where earnings are already high to smooth out profits over time. Typically, firms recognize the need to balance the expenses and profits, but manipulating the timing of those expenses can significantly affect the reported earnings for a specific period.
Firms need to make decisions about capital projects that can lead to future profits. To fund these projects, they can use financial capital obtained from early-stage investors, reinvesting profits, bank loans or bonds, and selling stock. The choice of financing method also determines the cost and the implications for the company's financial statements. Manipulating operating decisions, like the timing of repairs, is one-way companies manage their reported earnings, but it can also raise ethical and legal questions concerning financial reporting and transparency.