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 ?
Headquartered in Banbury, ISoft was plunged into crisis in 2006 after delays to the NHS contract to provide a central database of medical records, coupled with profits warnings and the discovery of accounting irregularities.
had been directly involved in or aware of the accounting irregularities.
Beginning with an overview of the financial reporting environments and regulations in Hong Kong and the UK, he describes accounting irregularities in terms of exaggerating revenue, expenses, losses, and liabilities, and in presenting financial statements.
Ahold's management and its audit committee are studying the findings of the accounting investigation to decide whether "additional adjustments may be required" to correct the accounting irregularities and to identify needed improvements in controls and procedures at relevant companies.
Oliver Hilsenrath following an investigation into various accounting irregularities, including cash payments to outside entities, that the board determined may have been affiliated with Hilsenrath and a former CEO of the company.
Also, in June 1998, Vesta said it misstated its earnings and was investigating accounting irregularities.
NEW YORK - In an effort to address the concerns of suppliers and investors during an investigation of possible accounting irregularities, Woolworth Corp.
The Company also reported that due to accounting irregularities, its annual and quarterly financial statements dating back to the second quarter of 2007 and through the third quarter of 2011 should no longer be relied upon and might need to be restated:
Troubled healthcare software supplier iSoft Group yesterday suspended its commercial director - one of the founders of the company - after an initial investigation found evidence of accounting irregularities in the 2004 and 2005 financial years.
As Fannie Mae officials reel from a series of negative headlines and brace for the possibility of long-threatened legislation aimed at putting tough curbs on its activities, published reports are pointing to serious accounting irregularities that suggest systemic problems with controls and procedures.
told colleagues last month that he hoped he never would have to explain accounting irregularities to securities regulators, according to internal documents turned over to Congress.