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 would not necessarily comment on other people's research, but I would tell you that I don't believe the Off Wall Street report suggested any accounting irregularities," Delco said.
Minkovsky has directed complex litigation matters regarding fraud and forensic accounting, accounting restatements, securities fraud, accounting irregularities, merger and acquisition disputes, professional liability, bankruptcy and solvency, business valuation, and general damages issues.
The high-tech giant had planned to release earnings on August 31, however, a serious of accounting irregularities forced it to postpone the results twice, Xinhua news agency reported.
LONDON (Reuters) - British insurer RSA blamed a handful of executives for accounting irregularities at its Irish division, attempting to draw a line under a scandal that left it with a 200 million pound ($329 million) hole in its finances.
RSA said it has to reserve another Au130m to settle personal injury claims at its scandal-hit Irish unit at the centre of allegations of financial and accounting irregularities. It may also scrap its annual dividend to save Au240m, as it seeks to resolve a Au500m shortfall in its accounts.
THE boss of a Merseyside-based plant and tool hire business with stores around the country has quit after the discovery of "accounting irregularities."
In an affidavit to Delhi High Court, the Union home ministry had said that " only minor accounting irregularities were found...
The SEC has for more than a year probed accounting irregularities and other problems at Chinese companies listed on US stock exchanges.
WorldSpreads, which runs online and telephone trading services, was placed into administration at the weekend after "accounting irregularities" were found.
Hoffman also played down rumours of accounting irregularities, and said that there was an accounting discrepancy in the bank's financial statement in June.
Following the collapse of Enron in November 2001, announcements of accounting irregularities and financial misrepresentations engulfed the financial market, causing a crisis of confidence in management, corporate governance, and financial reporting.
Earlier this month, the three people close to Ozawa were indicted over accounting irregularities in connection with a land deal in Tokyo, which involves an unregistered 400 million yen, but Ozawa himself was not indicted due to lack of evidence.