cookie jar accounting

cookie jar accounting
n.
The corporate accounting practice of taking a reserve to reduce profits in good years and then using that reserve to increase profits in bad years. Also: cookie-jar accounting.
Example Citation:
Providing further evidence of warming relations between Microsoft and regulators, the company is preparing to settle a Securities and Exchange Commission case alleging improper accounting.
The 1999 case alleges Microsoft manipulated financial reports by stashing money in reserve accounts. Called "cookie-jar accounting" or "income smoothing," the practice helps portray steady earnings growth that appeals to Wall Street and may boost a company's stock.
— Brier Dudley, "Microsoft, SEC talks part of trend to settle," The Seattle Times, May 31, 2002
Earliest Citation:
SEC Chairman Arthur Levitt has made quite a stir, as recently as last Monday, by talking tough about the SEC's assault on so-called "cookie jar" accounting. This, according to Levitt, is when companies create bigger-than-needed reserves during the good economic times "so they can reach into them when needed in the bad times" and thereby make it seem like they've got steady sales and earnings growth.
— Herb Greenberg, "What's the Difference Between 'Cookie Jar' and 'Honey Pot' Accounting?",> TheStreet.com, November 20, 1998
Notes:
As the above citation says, cookie-jar accounting is the fun way of saying "income smoothing." Note, too, that the reserve held by a company in good years is also called a cookie-jar reserve. In fact, this phrase seems to have been the source of cookie jar accounting. On September 28, 1998, the Chairman of the U.S. Securities and Exchange Commission (SEC) gave a speech: http://www.sec.gov/news/speech/speecharchive/1998/spch220.txt in which he derided several accounting abuses, including cookie jar reserves:
Miscellaneous "Cookie Jar Reserves"
A third illusion played by some companies is using
unrealistic assumptions to estimate liabilities for such items as
sales returns, loan losses or warranty costs. In doing so, they
stash accruals in cookie jars during the good times and reach
into them when needed in the bad times.
— Arthur Levitt, "The 'Numbers Game'," speech, September 28, 1998
The cookie jar reference was taken from the speech and used to create the cookie jar accounting phrase, as the earliest citation (below) makes clear.
Related Words: Category:

New words. 2013.

Игры ⚽ Поможем написать реферат

Look at other dictionaries:

  • Cookie jar accounting — or cookie jar reserves is an accounting practice in which a company uses generous reserves from good years against losses that might be incurred in bad years. An example of a cookie jar reserve is a liability created when a company records an… …   Wikipedia

  • Cookie Jar Accounting — An accounting practice in which a company uses generous reserves from good years against losses that might be incurred in bad years. Cookie jar accounting is a sign of misleading accounting practices. This gives the sense of income smoothing ,… …   Investment dictionary

  • Cookie jar (disambiguation) — A Cookie jar is a jar that holds cookies. Cookie jar may also refer to: Cookie Jar (song), by Gym Class Heroes Who Stole the Cookie from the Cookie Jar? , an elementary school song. Cookie Jar Group, the Canadian animation studio Cookie Jar Kids… …   Wikipedia

  • Cookie jar — This article is about a jar that holds cookies. For other uses, see Cookie jar (disambiguation). Cookie jars are utilitarian or decorative ceramic or glass jars often found in American and Canadian kitchens. In the United Kingdom, they are known… …   Wikipedia

  • Cookie Jar Group — Cookie Jar redirects here. For other uses, see Cookie Jar (disambiguation). Cookie Jar Group Type Private Industry Distribution and production …   Wikipedia

  • cookie jar reserves — A semi humorous term for *reserves or accrued expenses created with the intention of manipulating *financial statements. The term derives from the image of dipping at one’s convenience into a jar of cookies. By analogy, reserves of this type are… …   Auditor's dictionary

  • Creative accounting — The manipulation of *financial statements through the use of imaginative or unusual accounting techniques. Creative accounting techniques include, among other things, the following: (i) extension of the *amortization periods of *long term assets… …   Auditor's dictionary

  • Voodoo Accounting — Any form of accounting that does not follow principles of conservatism. While there are many methods by which financial statements can be fudged, it always comes down to inflating revenue or hiding expenses. Examples of accounting shenanigans… …   Investment dictionary

  • green accounting — n. A system in which economic measurements take into account the effects of production and consumption on the environment. Example Citation: Some independent research groups have tried to devise a kind of green accounting or general progress… …   New words

  • Business (General) — Business General adminisphere aerotropolis bads BAM boomsayer booth bunny borrow brains Buns of Steel …   New words

Share the article and excerpts

Direct link
… Do a right-click on the link above
and select “Copy Link”