- creative accounting
- Misleadingly optimistic, though not illegal, forms of accounting. This can occur because there are a number of accounting transactions that are not subject to regulations or the regulations are ambiguous. Companies sometimes make use of these ambiguities in order to present their financial results in the best light possible. In particular, companies often wish to demonstrate increasing accounting profits and a strong balance sheet. Examples of transactions in which creative accounting has taken place concern consignment stocks and sale and repurchase agreements. In these contexts, creative accounting will involve the separation of legal title from the risks and rewards of the activities, the linking of several transactions to make it difficult to determine the commercial effect of each transaction, or the inclusion in an agreement of options, which are likely to be exercised. Such policies are often referred to as off-balance-sheet finance or window dressing. Creative accounting is now less prevalent than it was in the 1980s. This is due both to a number of scandals that have raised the profile of issues such as corporate governance and the responsibilities of auditors, and to the activities of the Accounting Standards Board and the Urgent Issues Task Force, which have addressed some of the worst abuses.
Accounting dictionary. 2014.
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creative accounting — or creative accountancy see ↑creative above. • • • Main Entry: ↑create * * * creative accounting UK US noun [uncountable] business the practice of showing financial information in a way that gives a false idea but is not illegal Th … Useful english dictionary
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creative accounting — Misleadingly optimistic, though not illegal, forms of accounting. This can occur because there are a number of accounting transactions that are not subject to regulations or the regulations are ambiguous. Companies sometimes make use of these… … Big dictionary of business and management
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