Skip to main content

Reasons for use



In recent times and as a consequence of the financial crisis that has affected large international companies, creative accounting has become particularly relevant, questioning the data presented, as well as the credibility of auditors and advisors.

Discussions about the reasons that have led some companies to implement creative accounting have focused primarily on the impact they can have on the decisions of investors on the Stock Exchange as they have used "accounting tricks" to deceive To investors.

Among the reasons that have the managers of the companies that list their shares, to try to manipulate the accounts through the use of creative accounting, the following stand out:

Companies generally prefer to reflect a stable trend in earnings growth, rather than showing volatile profits with dramatic series of ups and downs.
It can help to maintain or "increase" the stock price, both by reducing apparent levels of indebtedness, and thus making the company appear to be exposed to lesser risk, as creating the appearance of a rising profit trend.
If managers are engaged in internal operations with the actions of their company, they can use creative accounting to delay the arrival of the information to the market, taking advantage of the opportunity to benefit from their insider information.
Ethically, the first of the three reasons put forward, they are open to honest debate. The other two ethically unacceptable reasons, especially the last one.

Comments

Post a Comment

Popular posts from this blog

Most Common Transactions

Analysts and researchers have compiled a collection of the most common transactions that can be found recorded in company books handled using the criteria of creative accounting. Some of these transactions are: Increase or reduction of expenses: Accounting rules provide a margin of maneuver in relation to the quantification of certain expenses or income, such as depreciation, depreciation or the activation of certain expenses, such as, for example, Research and development costs. Increase or reduction of income: In some cases the recognition of income may be delayed, by virtue of principles such as prudence or correlation of income and expenditure. Increase or decrease of assets: Inventories can be valued according to different methods (FIFO, LIFO Weighted Average among others) so that the total amount may differ with the corresponding effects on the costs of sales and the result. These changes will affect the rati...
Post a Comment
Read more

Creative accounting

Creative accounting . This term is used to describe the process by which accountants and advisors use their knowledge about accounting standards to make up the figures reflected in the company's accounting, while still complying with accounting principles. In this way, as criteria or other aspects of accounting are applied, the results may vary and be more favorable to organizations. Rise school is Best School of Accountancy in Lahore.CA admissions in Lahore now open. The best School of Accountancy in Pakistan offers CA in Lahore and Best CA in Pakistan. Enron, World Com and others are some cases of creative accounting (euphemism for fraud with numbers) that have appeared in recent times, have had a great impact on the American economy, to the point that markets have lost confidence in the Generally accepted accounting principles , in auditors, advisors and even in investment analysts; Who recommend buying this or that stock, earn good commissions and leave thousan...
Post a Comment
Read more

Techniques and Methods

There are several techniques for the application of creative accounting, it is the same situation that arises if you want to pay a few taxes within the legality. Therefore, a company that wants to modify its results will seek in the accounting regulations those parts that are not regulated, have an alternative treatment or are issues in which they can be optimistic or pessimistic when making a future forecast. Make-ups are also made when valuing inventories and how to reflect provisions; In the form of accounting for debts, exchange differences, off-balance sheet transactions, obligations or contingencies. Rise school is Best School of Accountancy in Lahore.CA admissions in Lahore now open. The best School of Accountancy in Pakistan offers CA in Lahore and Best CA in Pakistan. Other companies opt for creative accounting in consolidation processes; In the reclassification of assets and liabilities and in the evaluation of profit and loss, including ex...
Post a Comment
Read more