creative accounting

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Creative Accounting

The practice of recognizing revenue in a way that makes a company look better than it is while still conforming to the GAAP. Creative accounting seeks to inflate stock prices, for example, by selling assets at the end of a year to create a profit that offsets a loss. One could argue that creative accounting hides a company's true financial state, but, unlike aggressive accounting, creative accounting is generally legal. See also: Sarbanes-Oxley Act of 2002.

creative accounting

The use of aggressive and/or questionable accounting techniques in order to produce a desired result, generally high earnings per share. Creative accounting may include selling assets with a low cost basis, shipping unusually large quantities of product near the end of the year, and failure to write down inventories that have declined in value.

creative accounting

the use of discretion in the application of ACCOUNTING CONCEPTS so as to report profit and asset figures which are flattering to the company. By subtle use of different DEPRECIATION methods for fixed assets, or different STOCK VALUATION methods, or techniques like OFF-BALANCE SHEET FINANCING, a company's senior managers can ‘massage’ or ‘window-dress’ the profits for any trading period to impress shareholders. Such interpretations are legal, if somewhat dubious. Although the professional accounting bodies have issued Statements of Standard Accounting Practice and Financial Reporting Standards to try to curtail the scope for arbitrariness in the application of accounting concepts when measuring business income, considerable latitude still exists in the interpretation of accounting data and the reporting of accounting results. See ACCOUNTING STANDARDS.
References in periodicals archive ?
I seem to remember the Tories were accused of cooking the books regarding the employment figures when they were in power.
Mr Skilling, 50, is accused of cooking the books to hide the financial problems and of making pounds 60million by selling shares at artificially high prices.
These are the same people who wanted blood from the Enron executives for cooking the books, losing money for their investors, and lying about it.
SWOOPS on curry houses and chip shops have revealed dozens were cooking the books.
A prison union boss jailed for cooking the books has been given a cushy job behind bars .
THE term "income statement smoothing" sounds harmless enough - but it means cooking the books to hide losses from shareholders.
By cooking the books in this slipshod way, city leaders were able to pat themselves on the backs for their economic brilliance.
A FIRM of solicitors has been caught cooking the books, a court heard yesterday.