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 ?
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.
Garry Clark, executive director of the Ontario Prospectors Association, said such creative accounting practices are already commonplace in the sector.
LITERATURE REVIEW ON CREATIVE ACCOUNTING AND INVESTOR SKEPTICISM
After its ambiguous accounting treatment of Bank of Moscow's (BoM) consolidation, VTB has proceeded to use creative accounting practices that affect earnings: in 3Q11 the
using creative accounting," he said, adding that this was a result of the Central Bank losing its independence and becoming increasingly politicized.
It means creative accounting, manual workarounds, and lack of internal controls on financial and non-financial processes will be a thing of the past.
Mind you if I was him, I might feel slightly aggrieved that others who shared the green benches with him appeared to get away with their own creative accounting.
0 per cent, while it actually turns out that expenditures for 2010 were just transferred to 2011, in an inventive move of creative accounting alchemy, to achieve the fictional result of 5.
In another creative accounting move, The McClatchy Co.
The newspaper described some of the revelations in the diplomatic cables, saying they show "how the US seeks dirt on nations opposed to its approach to tackling global warming; how financial and other aid is used by countries to gain political backing; how distrust, broken promises and creative accounting dog negotiations; and how the US mounted a secret global diplomatic offensive to overwhelm opposition to the controversial 'Copenhagen accord.
Abstract: Creative accounting can be defined as an approach that allows managing the information which is shown in the financial statements.
However, being under the Government's cutcosh appears to have given rise to some creative accounting on the age stakes.