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 ?
Whoever did the 'creative accounting' is also not the government today.
Creative accounting remains a problematic research area.
Most small businesses are known to maintain two set of books (often unaudited): one for the proprietor himself known in local dialect as 'chopra' to keep abreast with the true state of financial affairs and the other laced with 'creative accounting' meant mainly to present to the taxman.
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.
"No child in a local authority school should be disadvantaged by the creative accounting that appears to be happening within some of these academy schools."
What are your top tips to spotting creative accounting or accounting fraud?
You should take legal advice on the retrospective reporting, as what your MD sees as "creative accounting" could actually be fraudulent.
One would gather that this is indeed, creative accounting at its best, to justify new destinations like Athens, that was closed down previously due to lack of bums on seats.
Thanks to the legal approval of creative accounting, company managers have an opportunity to exploit accounting solutions by means of which identical economic operations may be recorded in different manners so as to yield different financial results--a tool which will be used on an even larger scale in the future (in Polish accounting practice).
The creative accounting done to show that it will be more economical is totally untrue in reality.
They give new meaning to the term 'creative accounting.' The truth is, we paid the right taxes," Barrientos said.