Furthermore , his total compensation in the last year of his employment would reach record proportions . Additionally , since his pension is based on the average of his last three years ' compensation , Dan will continue to reap the benefits of this year ' s results for hopefully a long time to come . And who says CEOs don ' t think long term ?
Two remaining issues needed to be addressed . Those were ( 1 ) how to ensure a record-breaking year and ( 2 ) how to overcome any objections raised in attaining those results . Actually , the former was a relatively simple goal to achieve . Since accounting allows so many alternatives in the way financial events are measured , Dan could just select a package of alternatives , which would maximize the company ' s earnings and return on assets . Some alternatives may result in changing an accounting method , but since the new auditing standards were issued , his company could still receive an unqualified opinion from his auditors , with only a passing reference to any accounting changes in the auditor ' s opinion and its effects disclosed in the footnotes . As long as the alternative was allowed by generally accepted accounting principles , and the justification for the change was reasonable , the auditors should not object . If there were objections , Dan could always threaten to change auditors . But still the best avenue to pursue would be a change in accounting estimates , since those changes did not even need to be explicitly disclosed .
So Dan began to mull over what changes in estimates or methods he could employ in order to maximize his firm ' s financial appearance . In the area of accounting estimates , Dan could lower the rate of estimated default on his accounts receivable , thus lowering bad debt expense . The estimated useful lives of his plant and equipment could be extended , thus lowering depreciation expense . In arguing that quality improvements have been implemented in the manufacturing process , the warranty expense on the products sold could also be lowered . In examining pension expense , he noted that the assumed rate of return on pension assets was at a modest 6.5 %, so if that rate could be increased , the corresponding pension expense could be reduced .
Other possibilities occurred to Dan . Perhaps items normally expensed , such as repairs , could be capitalized . Those repairs that could not be capitalized could simply be deferred . The company could also defer short-term expenses for the training of staff . Since research and development costs must now be fully expensed as incurred ; a reduction in those expenditures