Creative accounting

Abstract

Creative accounting is a term used to describe the use of accounting practices that are technically legal, but that may be considered unethical or even fraudulent. It is also known as aggressive accounting, as it doesn’t strictly adhere to standard accounting principles. This practice involves manipulating financial data to make a company's financial performance appear better than it actually is, usually to meet financial targets or to inflate stock prices. This can be done in various ways such as inflating revenue, understating expenses, deferring or accelerating income, or manipulating balance sheet entries. While some creative accounting practices may be within the bounds of acceptable accounting practices, others are more questionable. In recent years, several high-profile cases of creative accounting have come to light, highlighting the need for greater transparency and accountability in financial reporting.