stevenwang78: What is financial façade?

Financial managers can do certain things in order to increase or decrease of the net income recorded in the year. This is called the Smoothing of gain, income averaging, or just plain old façade. This is not the same as fraud or cooking in the books.

The most profit Smoothing means pushing the certain amount of income and expenses in the second year than they would normally be taken prisoner. A technique for Smoothing of gain is to slow down normal maintenance and repairs. This is called deferred maintenance. Many routine and recurring maintenance costs may be necessary for cars, trucks, machines, equipment and buildings can be delayed or postponed until later.

A company that a significant amount of training of employees and development spend delay, these programs to the next year, as costs in the current year are lower.

A company can reduce the year's expenses for marketing and product development.

An enterprise may up on its rules blendMode.lighten when slow-paying customers are written down to the last as a bad debt or uncollectable accounts receivable. The company can deter record some of her bad debt expenses until the following year.

A fixed asset that is not actively used have little present or future value of a company. Instead of writing from un-depreciated cost of the reduced active as a loss in the current year, the company may slow the depreciation until next year.

You can see how to manipulate the timing of certain costs can make an impact on net profit. This is not illegal, but companies can go too far in massaging the numbers, so that its financial statements as misleading. For most, but is not profit smoothing is much larger than hole Rob. Auditors refers to this as a compensatory securities. Compensate for the effects of next year and cancel the effects of the current year. This year's smaller cost is offset by additional costs of the following year.

stevenwang78

Monday, February 14, 2011

What is financial façade?

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