Income Statement Presentation of Unusual Loss

For instance, the funds owed the company by the Rigas family went undisclosed in the statements, because the management at Adelphia deemed such disclosure as being “unnecessary” (Barlaup, Hanne, & Stuart, 2009). Given that Adelphia was a publicly traded company, the purposeful non-disclosure caused potential investors to rely on financial records that were grossly misleading. The inevitable result was the investors continued to inject money into a company that had all the appearances of profitability and sustained growth, but that was, in reality, rapidly becoming insolvent. Moreover, lending institutions also relied on the “independently-audited” financial statements, and they were more than eager to loan the company money, given Adelphia’s presumed state of financial “profitability.”

After reviewing the financial information of the Tech Tennis, USA, there was a concerned due to some unusual changes in the company’s accounts. Financial statements play a crucial part in the determination of the progress of an organization. It assists the relevant personnel to identify whether the company is making profits or making losses. Although unethical, some companies will tend to deliberately misrepresent some of their financial statement information to create a false impression of the company’s success. There are various techniques that organizations utilize to manipulate their financial statements such as overstating their revenues (Bierstaker, Brody, & Pacini, 2006). In addition, some organization will tend to inflate their sales without considering their cash flow amount that the organization has acquired which will be a red flag to investigate. Consequently, financial statements provide vital information that helps both internal and external users to understand the position of the organization. Some companies in an attempt to continue in the market, they end up manipulating their financial statements that create an illusion of the success of the organization.

The study of Gowthorpe and Amat (2005) illustrated two different types of behavior of the preparers of financial statements. To demonstrate the manipulative behavior of preparers of financial statement, the researchers used the accounting regulation in the USA and Spanish economy. The research demonstrated the weaknesses of U.S. standards in relation with a preparer lobby. Major corporations challenge regulators by insistent their interests. Consequently, the regulation attempts to mediate and compromising between the regulator and the preparer of financial statements (p. 61). Unfortunately, the interests of financial statement users are not taken into consideration. Moreover, practices of macro- and micromanipulations do not reflect the financial user’ needs. The main goal of financial statements is to deliver the useful information to investors. However, bargained accounting regulation is unable to fulfil the key objective of financial statements (pp. 62-63). It leads to the conclusion that the accounting at macro- and micro levels is ethically questionable. Business ethics should demonstrate a high quality of the individual. Preparers of financial statements exercise the manipulative behavior through the amoral arguments and no obligation for the unethical actions. The financial misrepresentation destroys the shareholders’ income, economic activity in the country, and the public trust.

The financial crisis of the early 2000s left many investors and stockholders nervous about the accuracy of financial statements issued by public companies. The financial crisis resulted after many previously successful companies suddenly tanked due to restatement of their financials. These companies include Enron, Tyco, Sunbeam, Rite-Aid, Xerox and WorldCom amongst others (Kieso, 2014, p. 17). How could many previously successful companies suddenly go belly-up? The evidence was to be seen, these companies had used malicious accounting techniques to hide massive amounts of debts and increase their assets without having to show them accurately in a fair and honest way on their financial statements.

Since Sarbanes-Oxley had been put into place to protect investors from possible fraudulent, accounting practices, which could be a misrepresentation of the company,’s actual Financials. The major firms, which lead to the development to Sarbanes-Oxley, is no longer in business. Some

* For example, SME or even big companies in order for them to maintain their performance in financing reporting is to get more people to invest. It possible they would manipulate by deceiving their financial reporting to impress more investor to invest.

SEC Chairman Arthur Levitt decried what he termed "accounting hocus-pocus" and called for coordinated efforts to uncover it. He targeted the practice by some companies of improperly boosting reported earnings by manipulating the recognition of revenue. Among the most common methods of doing this are the bill-and-hold transaction and a long list of sham transaction involving shipping, billing and/or related-party involvements. Both the SEC and the AICPA seek to increase independent auditors ' awareness of problems associated with these practices.

The readers should read this specific study to understand corporate fraud. Corporate fraud occurs more regularly than one may think, therefore, understanding what corporate fraud is and the history surrounding it would allow companies and accounting professionals to understand how to help prevent it from occurring within their workplace. In addition, the research provides vital information and history regarding SOX, PCAOB, and AICPA and the rules and regulations required with financial statement reporting and how to better implement rules and regulations to make the company a safer place of business. The research is also vital to companies and accounting professionals as it explains the type of people that commit financial statement fraud

When we talk about financial planning we have to take step back, look at the whole picture, and understand how it begins. Financial Management is the key essential in an organization when you plan financially. Financial Management is the building blocks for all accounting records and business transactions that occur. We cannot forget that decisions are based on the organizations fiscal objectives others are based on general accounting principles. So to better understand you must ask the question of “Is the financial management of the organization strong and how is the financial reporting records validity”?

The statements from the financial disclosures were so unclear, yet seemed too good to be true. Consequently, a wide number of corporations received complaints from investors under the regards of the published financial statements. Nonetheless, these inaccuracies, whether reported or unreported, led corporations to go into debt with both creditors and investors.

The paper provides a brief analysis of the implications of real earnings management (REM) as well as off-balance sheet financing (OBSF) which are relevant to the valuation of a manufacturing company. It begins with the introduction of the concepts of REM and OBSF respectively, followed by lists of different major types of REM and OBSF. Afterwards, it distinguishes the two methods from other ones used for financial statement manipulation. Then, the essay illustrates an explanation related to the motivations for the financial statement manipulation and the final part is relevant to methods for a perspective investor on how to detect the occurrence.

Nowadays, as our economy is facing possible everyday crises, managers undergo an increasing pressure in order to keep their company 's earnings stable. Shareholders and analysts expect companies to meet forecasted goals and not to deviate from these. Especially, reliable companies are to report positive results and shall not present any 'surprises '. Managers therefore often turn to their accounting departments for help, whose job it then is to improve the bottom line by changing the information shown in financial

Financial reports are one of the most important factors on evaluating whether an organisation has met its objectives and goals, and also has satisfied its directors, lenders, and other stakeholders. Although the relevant accounting and financial standards, regulations, and frameworks are established for the fair and reliable presentation of financial reports, there are still fraud issues from manipulating financial information. Due to the recent global economic crisis, corporates tend to use creative accounting to maximise their profit and financial performance, and it seems to result in some serious financial frauds. A lot of questions come up with this creative accounting technique as well as the relation to corporate governance and frauds. It obviously has some negative results from inappropriate use of creative accounting but, on the other hand, it could be useful to present a company’s interests better within laws and regulations. This essay will elaborate what the creative accounting is, why companies use this accounting method, both positive and negative views of using creative accounting with appropriate examples and cases, and possible recommendations to improve the accounting standards and systems.

The article discusses that in 1976 the U.S. Supreme Court ruled in one case that omitted financial statement information altering a reasonable investor’s decision proves the material nature of the information. The article continues by describing that lower courts earlier ruled that all financial information whether material or not must have full disclosure in a company’s financial statements. The rejection of the lower courts’ ruling by the U.S. Supreme Court gives the investor the ability to focus on the aspects of the financial statements that are most important by allowing the elimination of minute details (Sauer 2007, 317-357). In essence, this ruling allows for the elimination of financial information below the determined materiality threshold unless otherwise required by the ruling of a regulatory body.

There is more flexibility for manipulation of the accounting figures. The authors also points out that this flexibility for manipulation should not be underestimated citing past loans and goodwill policies crisis.