Management wants to paint the rosiest possible picture of a company’s financial performance. But aggressive earnings management (or earnings “spin”) can mislead investors and lenders. Red flags of earnings management include premature revenue recognition, miscellaneous “cookie jar” reserves, “big bath” restructuring changes, immediate acquisition write-offs and over-reliance on metrics that don’t conform to the accounting rules. Contact us to learn how to identify when a company may have used “creative” accounting practices to improve their financial picture.
