Big bath: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson (Update final sentence.) |
imported>Doug Williamson (Expand last sentence.) |
||
| Line 11: | Line 11: | ||
Modern financial reporting standards aim to prevent | Modern financial reporting standards aim to prevent such manipulations. | ||
Latest revision as of 11:37, 17 February 2019
Accounting - manipulation.
'Big bath' provisions are, or were, an accounting manipulation designed to boost profits and improve trends in future reporting periods.
An excessive 'big bath' provision is made in the earlier reporting period, reducing net assets and profits (or increasing losses) in the earlier 'bad' year.
The consequence is to artificially increase profits in later periods.
'Big bath' provisioning was particularly attractive to new managements as a way to assign more blame to their predecessors, while claiming more credit for subsequent, partly artificial, improvements.
Modern financial reporting standards aim to prevent such manipulations.
