By Charles W. Mulford
Mulford describes ways that a few managers manage their monetary stories to create larger results. whereas a few flexibility exists in the GAAP ideas, a few kinds of ameliorations transcend the bounds of right reporting. Mulford offers the simplest equipment for detecting what's no longer allowable and perception into how accountants and their directors view the ethics of manipulating data.
content material: monetary numbers video game. Rewards of the sport --
Classifying inventive accounting practices --
Plan of this publication --
How the sport is performed. Accounting coverage selection and alertness --
Fraudulent monetary reporting --
cleansing up after the sport --
Clarifying terminology --
gains administration : a more in-depth glance. what's profits administration? --
Incentives and stipulations for gains administration --
profits administration innovations --
proof of profits administration --
Effectiveness of profits administration --
Is profits administration strong or undesirable? --
The SEC responds. The chairman's speech --
The motion plan --Subsequent advancements --
implementing the securities legislation --
monetary pros communicate out. Survey of economic pros --
Survey effects --
spotting untimely or fictitious profit. Is it untimely or fictitious profit? --
whilst should still profit be well-known? --
Detecting untimely or fictitious profit --
list to notice untimely or fictitious profit --
competitive capitalization and prolonged amortization rules. fee capitalization --
Detecting competitive fee capitalization guidelines --
Amortizing capitalized charges --
Detecting prolonged amortization sessions --Checklist to realize competitive capitalization and prolonged amortization rules --
Misreported resources and liabilities. hyperlink with said gains --
Boosting shareholders' fairness --
puffed up resources --
Undervalued liabilities --
list to discover misreported resources and liabilities --
Getting inventive with the source of revenue assertion : class and disclosure. present source of revenue assertion standards and practices --
Reporting finished source of revenue --
artistic source of revenue assertion classifications --
Creativity with different points of the source of revenue assertion --
Getting inventive with the source of revenue assertion : pro-forma measures of profits. Recasting the base line : pro-forma profits measures --
issues of funds stream reporting. Reporting funds movement --
issues of suggested working money move --
utilizing working funds move to notice artistic accounting practices --
record for utilizing working money move to become aware of artistic accounting practices.
summary: Mulford describes ways that a few managers manage their monetary stories to create larger results. whereas a few flexibility exists in the GAAP ideas, a few sorts of transformations transcend the boundaries of right reporting. Mulford presents the easiest equipment for detecting what's no longer allowable and perception into how accountants and their directors view the ethics of manipulating facts
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Additional resources for The financial numbers game : detecting creative accounting practices
Software Revenue Recognition One example of flexibility in the application of accounting principles that has recently been tightened significantly by accounting regulators is in the area of software revenue recognition. The Microsoft example provided in Chapter 1 illustrated how changes in accounting standards have forced the company to accelerate the recognition of its software revenue. 7 As an example of how software revenue recognition practices have changed, consider the following revenue recognition practices taken from the footnotes to the annual reports of four software companies in early 1991 and 1992.
American Software recognized the bulk of its revenue at the time the user manuals were shipped, even if that shipment time was before shipment of the software product itself. With this policy, a shipment of manuals at the end of an accounting period could result in an increase in revenue recognized. In contrast, Autodesk waited until its software products had been shipped before recognizing revenue. In this more conservative stance, the earning process was linked to actual shipments. As noted, accounting principles for software revenue recognition have been tightened in recent years.
14 From the annual report of C. R. 15 All three companies share the same general industry group, yet all three have chosen amortization periods for goodwill that differ. The periods range from as little as five years to as many as 40. At the time of this writing, generally accepted accounting practices require amortization of goodwill but permit companies to choose the amortization period. The only requirement is that the amortization period cannot exceed 40 years. The longer the amortization period, the lower the annual charge to expense.
The financial numbers game : detecting creative accounting practices by Charles W. Mulford