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.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Mentioned in

References in periodicals archive

Whoever did the 'creative accounting' is also not the government today.

Mujahid says under PH, cost of managing Haj pilgrims reduced by RM58m

Creative accounting remains a problematic research area.

Assessment of Accounting Spheres as Viewed by Accountants of Czech Enterprises

Most small businesses are known to maintain two set of books (often unaudited): one for the proprietor himself known in local dialect as 'chopra' to keep abreast with the true state of financial affairs and the other laced with 'creative accounting' meant mainly to present to the taxman.

SECP reproaches CAs over fraudulent practices

A lot of countries will now lose some billions of euros, which they will now brush off , for when the IMF prints money from nothing, money without the backing of gold or silver, then creative accounting becomes a very fine art.

Creating money from nothing

Garry Clark, executive director of the Ontario Prospectors Association, said such creative accounting practices are already commonplace in the sector.

Transparency act puts First Nations at risk: new legislation has far-reaching implications for First Nation-industry relations

"No child in a local authority school should be disadvantaged by the creative accounting that appears to be happening within some of these academy schools."

City academies with PS4m cash reserves

What are your top tips to spotting creative accounting or accounting fraud?

The value of auditing

You should take legal advice on the retrospective reporting, as what your MD sees as "creative accounting" could actually be fraudulent.

Hot potato

One would gather that this is indeed, creative accounting at its best, to justify new destinations like Athens, that was closed down previously due to lack of bums on seats.

Creative accounting?

Thanks to the legal approval of creative accounting, company managers have an opportunity to exploit accounting solutions by means of which identical economic operations may be recorded in different manners so as to yield different financial results--a tool which will be used on an even larger scale in the future (in Polish accounting practice).

Significance of the accounting paradigm in the decision-making process in company management (based ONIAS accounting practices in Poland and other countries)

The creative accounting done to show that it will be more economical is totally untrue in reality.

Merging counties just won't deliver; LETTERS

They give new meaning to the term 'creative accounting.' The truth is, we paid the right taxes," Barrientos said.

Mighty's Market share reaches 22.5%, pays P8.2 billion in taxes