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Financial Number Games

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Submitted By leenash
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FINANCIAL NUMBER GAME

The game has many different names and takes on many different forms

Classification of creative accounting practice

Reward of the game
Label for the financial number game

Creative accounting practices
Any and all steps to play the financial numbers game, including the aggressive choice and application of accounting principles, fraudulent financial reporting, and any steps taken toward earnings management or income smoothing.
Income smoothing
A form of earning management designed to remove peaks and valleys from a normal earning series, including steps to reduce and store profits during good years for use during slower years.
Aggressive accounting A forceful and intentional choice and application of accounting principles done in an effort to achieve desired result, typically higher current earning whether the practices followed are in accordance with GAAP or not.

Earning management
The active manipulation of earnings toward a predetermined target, which may be set by management, a forecast made by analysts or n amount that is consistent with a smoother more sustainable earnings stream.
Fraudulent financial reporting
Intentional misstatements or omissions of amounts or disclosures in financial statements, done to deceive financial statement users, that are determined to be fraudulent by an administrative, civil or criminal proceeding.
Depend on the scope of the tactics employed
Label for the financial game

Rewards of the game
Creative accounting practices to improve reported financial measures may lead to lower borrowing costs

Expected reward earn by those who play the financial numbers game may ne many and varied.

Political cost effects
Bonus plan effects
Borrowing cost effects
Share-price effects

Large and high profile firms may have the motivation to manage their earnings down-ward in an

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