Cookie Jar Accounting

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Cookie Jar Accounting

An accounting method in which a company understates how healthy it is when its finances are doing well and likewise, overstates its health when it is performing poorly. The company generally does this by applying excess revenues from good years to bad years. While this is common and expected to an extent, it can be detrimental to the company and its investors if taken too far. See also: Carryforward, Carryback, Aggressive Accounting.
References in periodicals archive ?
Cookie jar reserves are hidden accounts that let an organization adjust either quarterly or yearly earnings.
In much the same way that a company creates a cookie jar reserve for financial reporting, it may use inventory to reduce its tax liability.