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 ?
Ms Wass said the case, "boiled down in its essence", amounted to "cooking the books or what lawyers call false accounting".
Harvard public policy professor Anne Piehl, who reviewed the study before it was published, calls this instance of it cooking the books."
Charts compare different regulatory bodies' rules; one that illustrates well-known cases of "cooking the books" by Rite-Aid, Aurora Foods, Livent, W.R.
He promised, in a speech on Wall Street, that his administration would 'end the days of cooking the books, shading the truth and breaking the law'.
It is at these instances," he argues, "that manipulation of accounting data and cooking the books suddenly seems to be a plausible way out." How true.
Accountants who are CPAs working for these entities and institutions must be actively licensed as CPAs so they will be held accountable and to avoid the term "cooking the books" of private and public industries.
Total fraud leapt by 10% with almost a quarter of a million cases from dodgy insurance claims and cooking the books to raiding accounts, leaving the economy with a pounds 30 billion bill.
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Fifteen people made sweet and savoury delights, including cakes, mince pies and cheesy biscuits, for the Cooking the Books contest, held at Keresley library in Bennetts Road.
The prizewinning pie, pastie and sausage maker is to be on channel five's teatime cookery programme "Cooking the Books" tonight.