Cookie Jar Accounting

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Cookie Jar Accounting

An accounting method in which a company understates how healthy it is when its finances are doing well and likewise, overstates its health when it is performing poorly. The company generally does this by applying excess revenues from good years to bad years. While this is common and expected to an extent, it can be detrimental to the company and its investors if taken too far. See also: Carryforward, Carryback, Aggressive Accounting.
References in periodicals archive ?
"Signs of Backlash Against SEC's Attack on Cookie Jar Reserves and Income Smoothing."
Five of the more popular ones I want to discuss today are "big bath" restructuring charges, creative acquisition accounting, "cookie jar reserves," "immaterial" misapplications of accounting principles, and the premature recognition of revenue.
The first is that it will allow companies to create a cookie jar reserve with their inventory.