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 ?
That appetite for creative accountancy has ballooned out of all control since the Internet transformed the rumour mill into a 24/7 phenomenon.
Charles is partial to some creative accountancy too.
McGhee would need to turn his hand to creative accountancy as well as football management to do his best for the Lanarkshire club under those circumstances.
Derek Simpson, joint leader of the Unite union, fumed: "This is creative accountancy with people's jobs.
The latest raft of front-page headlines about the Labour Party's unconventional approach to book-keeping was mirrored by fresh 'revelations' about the creative accountancy that sustains football's grey economy.
Slick tax advisers and creative accountancy were admired as a kind of smartness and there was virtually no sense of civic responsibility whatever.
His creative accountancy is good news for the country's schools and hospitals.
Instead, customers seem to be fair game for creative accountancy.
At the moment, the CSA can easily get hold of poor punters who are on PAYE but some wide guys working for themselves can use creative accountancy.
So for creative accountancy, therefore, Lycra shorts must mean the only way is up.
And TGWU official David Stark added: "We don't accept the figures or the creative accountancy that comes with it.
If the men who juggle the numbers can get away with a little creative accountancy, they can be relied upon to do it.