Big bath: Difference between revisions
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imported>Doug Williamson (Create page. Sources: Financial Reporting Council https://www.frc.org.uk/accountants/accounting-and-reporting-policy/uk-accounting-standards/standards-in-issue/frs-12-provisions,-contingent-liabilities-and-cont, Accounting tools https://www.accountingtool) |
imported>Doug Williamson (Update final sentence.) |
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An excessive 'big bath' provision | 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 | The consequence is to artificially increase profits in later periods. | ||
'Big bath' provisioning was particularly attractive to new managements as a way to assign blame to predecessors, while claiming credit for subsequent, partly artificial, improvements. | '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 this | Modern financial reporting standards aim to prevent this manipulation. | ||
Revision as of 11:36, 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 this manipulation.
