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Techniques used in creative accounting.


Despite the potential importance of the financial statemens and increasing the rigidity rigidity /ri·gid·i·ty/ (ri-jid´i-te) inflexibility or stiffness.

clasp-knife rigidity
 of normalization In relational database management, a process that breaks down data into record groups for efficient processing. There are six stages. By the third stage (third normal form), data are identified only by the key field in their record.  institutions accounting information fails to meet only part of its functions are assigned. The most obvious consequence of this is many failed financial scandals.


As a journalist, Griffiths, I. notes that the figures presented to investors were completely changed to protect the guilty. This is in fact a scam (SCSI Configured AutoMatically) A subset of Plug and Play that allows SCSI IDs to be changed by software rather than by flipping switches or changing jumpers. Both the SCSI host adapter and peripheral must support SCAM. See SCSI.  and a legitimate name creative accounting (Griffiths, 1995).

Jameson, M., states that "The accounting involves dealing with different views and resolve conflicts between them in order to present transactions. Such flexibility facilitates manipulation, deception and distortion (Jameson, 1988).

Trotman defines creative accounting as a technique aimed at improving communication of information provided to investors. On the same line, Colasse B. is of the opinion that the expression designates creative accounting "practices of accounting information, often at the limit of legality le·gal·i·ty  
n. pl. le·gal·i·ties
1. The state or quality of being legal; lawfulness.

2. Adherence to or observance of the law.

3. A requirement enjoined by law. Often used in the plural.
, practiced by some companies who have the advantage of normalization, seeking to beautify the image and financial position and economic performance and financial.

According to according to
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

 Naser K.: "process by which, given the existence of breach rules, handling accounting figures, and taking advantage of flexibility, choose those practices of measurement and information processing information processing: see data processing.
information processing

Acquisition, recording, organization, retrieval, display, and dissemination of information. Today the term usually refers to computer-based operations.
 that allows financial statements from which should be in what managers want; process by which transactions are structured in such a way as to enable the "produce" the desired accounting result." (Naser, 1993).


The following deserve to be quoted, without an order of priority: intensity of competition in a context of crisis; degradation results and financial position; need financing: insufficient equity, the need to meet certain indicators (rate indebtedness, the result per share increased pressure on enterprises to communications the "elegant", especially coming from investors and analysts; desire to ensure a stable course to launch private companies wish to be given listed (Mulford & Comiskey, 1996). Accounting for pension reserves, capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets.  of costs, investment accounts and short-term claims of customers, accounting for inventories of tangible and intangible assets and accounting for long-term debt is not an option and some creativity (Moeller & Landry, 2009). Therefore we can say, maybe in a provocative manner that in these circumstances, there is creative accounting. We will allow only the fact that for several years, the economic situation pushes companies to use more possibilities left by the legal text and doctrine (Naser, 1993).


4.1 Tangible assets

(a) The practice of "subjective depreciation" of assets creates proper field of creativity in accounting. In the exercise of professional reasoning, IAS See iPlanet Application Server.

1. (computer) IAS - The first modern computer. It had main registers, processing circuits, information paths within the central processing unit, and used Von Neumann's fetch-execute cycle.
 36 requires that at each balance sheet date to determine whether there are indications that the asset depreciation suffered analyzed. If management estimates that the recoverable value is lower than the net accounting assets are considered impaired for the difference. In this case the result will be affected by recording a depreciation expenses. On the opposite side, if the management company seeks an attitude "optimistic op·ti·mist  
1. One who usually expects a favorable outcome.

2. A believer in philosophical optimism.

" about the outcome, will appreciate that there are no indications that the asset has suffered depreciation, thus avoiding diminishing results.

(b) The lease-back as they highlight the impact of a value that will be established in the year of sale, results. Charges will be recorded during the leasing contract (Jameson, 1988).

4.2 Goodwill

Underestimation assets purchased leads to increase goodwill. Cost of goodwill amortization resulting from the reduction outcome, with the exchange rate and competitiveness of the shares bids competitive. Charging goodwill to equity to reduce their lead, the result of years of future costs are not influenced by goodwill amortization (Griffiths, 1995).

4.3 Depreciation

Option for a particular method of depreciation or otherwise in connection with the accounting policy of the undertaking, the assignment in a systematic way the depreciation of an asset during its useful economic life has an impact on the profit and loss. Thus, a different method of depreciation has a different impact on the outcome (Moeller & Landry, 2009).

Depending on the method chosen is amended in time allocation of expenditure. An option on different useful life leads to different expenditure. Review of useful life lead to adjustment costs with current depreciation period and future periods. Deducting the residual value Residual value

Usually refers to the value of a lessor's property at the time the lease expires.

residual value

The price at which a fixed asset is expected to be sold at the end of its useful life.
 has the effect of reducing depreciation and therefore increases the outcome of exercise.

4.4 Inventories

The inventories provide sufficient opportunities for creative accounting and subjectivism sub·jec·tiv·ism  
1. The quality of being subjective.

a. The doctrine that all knowledge is restricted to the conscious self and its sensory states.

. An error detected on a voluntary basis in determining the size of existing stock in assets at the end of exercise can lead to a practice of "polishing" of the result, meaning that the underestimation or supraevaluarea stock finally has an impact not only on the financial statements of the current year but also on the belonging the following year.

Inclusion in stock inventory or death is a moral waste handling method. If stocks or death moral waste will be removed from management, spending will be affected, with consequences on the outcome in the sense acestuia. La reduce the opposite side, the management company can show a atitutudine optimistic, considering that these stocks will be dead recovered, especially in the situation of an economic recession.

The inclusion of financial costs in the cost of production of stocks has the effect of the increase in the outcome in which the inclusion of expenses. On the opposite side, where the management has a pessimistic pes·si·mism  
1. A tendency to stress the negative or unfavorable or to take the gloomiest possible view: "We have seen too much defeatism, too much pessimism, too much of a negative approach" 
 vision of the outcome, the result will apply the method, treating interest expense as an element of the power exercised.

4.5 Provisions for liabilities and charges

Practice provisions (increase, reduction) is an effective tool for "leveling" outcome. Establishment of provisions in the years where the profit result leads to the decrease, while the resumption RESUMPTION. To reassume; to promise again; as, the resumption of payment of specie by the banks is general. It also signifies to take things back; as the government has resumed the possession of all the lands which have not been paid for according to the requisitions of the law, and the  of the provisions in the income year in which the registers deficit increase leads to the result.


Mechanisms that have an impact on the balance sheet are listed in table 2.


a) Reducing the number of permitted accounting methods or by specifying the circumstances under which each method should be used;

b) Trading links will be considered as a whole (substance over form);

c) Recourse to regular review (revaluation Revaluation

A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e.
 of the assets); Creating an arbitration institution; The Court has the authority to require managers to review the financial and charged to their costs;

d) Auditors should to intensify in·ten·si·fy  
v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies
1. To make intense or more intense:
 their efforts to identify the possible manipulation of information supplied by the financial statements. In this regard, the audit should include an assessment of internal control of the company to prevent cases of creative accounting or fraud. To provide an extensive surveillance and more stringent, the auditors should be prepared to fight against their clients.


Freedom of choice of accounting policies by management companies, resulting in an increase or a bed and schedules of income, are in our view one of the main limits informational account profit and loss. Moreover, in practice there are cases where accountants, on grounds concerning the power conferred by the existing rules to make estimates and forecasts or to turn to alternative accounting treatments permitted use in some creative accounting techniques that are often limit laws and regulations.


Griffiths, I. (1995). New Creative accounting, Palgrave MacMillan, ISBN ISBN
International Standard Book Number

ISBN International Standard Book Number

ISBN n abbr (= International Standard Book Number) → ISBN m 
 0333628659, UK

Jameson, M. (1988). A practical guide to creative accounting, Kogan Page, ISBN 1850413013, UK

Mulford, Ch.; Comiskey, E. (1996). The Financial Number Game: Detecting Creative Accounting Practices, Prentice Hall Prentice Hall is a leading educational publisher. It is an imprint of Pearson Education, Inc., based in Upper Saddle River, New Jersey, USA. Prentice Hall publishes print and digital content for the 6-12 and higher education market. History
In 1913, law professor Dr.
, ISBN 0471370088, UK

Moeller, L; Landry, E. (2009) How to Maximize Creativity, Accountability, and ROI (Return On Investment) The monetary benefits derived from having spent money on developing or revising a system. In the IT world, there are more ways to compute ROI than Carter has liver pills (and for those of you who never heard of that expression, it means a lot). , McGraw-Hill, ISBN 0071615059, UK

Naser, K. (1993). Creative financial accounting: its nature and use, Prentice Hall, ISBN 0130617636, UK
Tab. 1. Opportunities, solutions and accounting traditions
regarding creative accounting on the balance sheet

 Opportunities for    Solutions that stops    Accounting traditions,
creative accounting    creative accounting     where solutions are
                                                  easy to apply

 Options regarding     Reducing the number      Western accounting
  the accounting          of accounting               model
      methods           methods permitted

Trends to estimate        Minimize the          Western accounting
                         opportunity for              model

  Entering into a     "Substance over form"        Anglo-Saxon
    transaction                                     Accounting
    artificial                                        model

     Planning              Prescribing             Anglo-Saxon
   transactions           revaluations              Accounting
     authentic                                        model

Tab. 2. Mechanisms that have an impact on the balance

   Elements              Mechanisms            Impact on balance sheet

Tangible assets   Lease-back: the sale of     --Improvement
                  fixed assets, followed by   revolving fund;
                  taking them in the          --Improve cash.
                  immediate location

Tangible assets   Revaluation of tangible     --Increased asset
and equtiy        assets                      value (increase in
                                              depreciation expenses)
                                              --Increased equity

Minority          Inserting in equity,        --Change indebtedness and
Interests         debt, or between the two    equity.

Loans             In substance defeasance     --Reduced rate
                  arrangement by which the    indebtedness;
                  transferred assets to a     --Increase rate financial
                  trust, which incorporates   autonomy;
                  the same time and           --Increase financial
                  management of debt.         profitability.

Customer Claims   Discounting of ticket       --Reducing the need
                  orders                      for working capital;
                                              --Increased Treasury

                  Assignment of claims from   --Slight decrease of
                  a pool of receivables for   working capital
                  obtaining cash              (from the difference
                                              between price and value
                                              of transaction);
                                              --Decreased need for
                                              working capital
                                              --Increased Treasury
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Author:Lungu, Ionut; Potecea, Valeriu; Rotaru, Horatiu
Publication:Annals of DAAAM & Proceedings
Article Type:Report
Geographic Code:4EUAU
Date:Jan 1, 2009
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