Aggressive Accounting

Posted in Finance, Accounting and Economics Terms, Total Reads: 392

Definition: Aggressive Accounting

It is a practice of misreporting the balance sheet and the income statement to make the company’s financials more attractive to its investors. It is a deliberate and purposeful tampering of the financial statements by the accounting department of a company. This can include over representing the revenues and delaying the representation of losses. This helps in increasing the market value of a company’s stock. This is usually considered a practice to deceive the investors by “cooking the books” of the company.

This practise of aggressive accounting can be implemented even while following GAAP principles. As a result, while it is not illegal in few cases, at times it is exploited and leads to illegal practices. This is also called as “innovative” or “creative” accounting.

Examples of cases where this is implemented and exploited are Enron, WorldCom and Satyam cases.



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