CFOs can do some things to increase or decrease net income that is recorded in the year. This is called smoothing profits, income smoothing or just plain old window dressing. This is not the same as fraud, or cookbooks.
Most smoothing benefits of pushing a certain amount of income and / or expenditure in other years which normally recorded. A common technique for smoothing benefits is to delay normal maintenance and repairs. This is known as deferred maintenance. Many costs and recurring routine maintenance required for cars, trucks, machinery, equipment and buildings may be delayed or postponed.
A company that spends a significant amount of money for training and employee development programs can delay until next year if the expenditure in the current year is lower.
A company can reduce its spending this year for market research and product development.
A company can cut back on its rules regarding when customers are in arrears written off as expenses when bad debts or bad debts. The company can check out some of its bad debts before the report next year.
An asset that is not actively used may have little current or future value of a company. Instead of typing in the cost of unamortized impaired as a loss in the current year assets, the company may delay the cancellation until next year.
You can see how to manipulate the timing of certain expenses may have an impact on net income. This is not illegal, but companies can go too far in massage numbers and their financial statements are misleading. For most, however, the smoothing of profit is not much more than robbing Peter to pay Paul. Accountants refer to these offsets. The effects next year offset the effects of the current financial year are canceled. Less spending this year is offset by an increase in spending next year.
Most smoothing benefits of pushing a certain amount of income and / or expenditure in other years which normally recorded. A common technique for smoothing benefits is to delay normal maintenance and repairs. This is known as deferred maintenance. Many costs and recurring routine maintenance required for cars, trucks, machinery, equipment and buildings may be delayed or postponed.
A company that spends a significant amount of money for training and employee development programs can delay until next year if the expenditure in the current year is lower.
A company can reduce its spending this year for market research and product development.
A company can cut back on its rules regarding when customers are in arrears written off as expenses when bad debts or bad debts. The company can check out some of its bad debts before the report next year.
An asset that is not actively used may have little current or future value of a company. Instead of typing in the cost of unamortized impaired as a loss in the current year assets, the company may delay the cancellation until next year.
You can see how to manipulate the timing of certain expenses may have an impact on net income. This is not illegal, but companies can go too far in massage numbers and their financial statements are misleading. For most, however, the smoothing of profit is not much more than robbing Peter to pay Paul. Accountants refer to these offsets. The effects next year offset the effects of the current financial year are canceled. Less spending this year is offset by an increase in spending next year.
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