Accounting Ethics (and fraud)

Postings by Art Berkowitz on ethics and fraud. Most of them are serious, but sometimes we also need to have a little fun.

My Photo
Location: Orange County, California, United States

Art Berkowitz, C.P.A. is an author, speaker, and consultant from Orange County, California. He writes ethics, fraud, and accounting courses (CPE) for accountants and other financial professionals. Art has also written a weekly online column for The Wall Street Journal and a book on the Enron debacle. To order any of his self-study courses go to

Thursday, June 15, 2006

Some Fun with Accounting Definitions

I noticed that consulting giant Deloitte Consulting released a software program – Bullfighter - that identified and helped eliminate business jargon. Author’s Note: On Deloitte’s website it states that they are no longer associated with any product that tries to make financial information clearer to the investor (or something to that effect.)

I thought it might be helpful to investors if I defined a few important accounting terms in light of recent corporate events.

Balance sheet – a place to hide the other side of a fictitious transaction.

Income statement – a description of the money that companies don’t really make, but show to investors.

Cash flow statement – a description of how companies take money from their investors and give it to their top executives.

Accountant – someone hired to explain how companies really made more money than they actually did.

Accounting standards – a group of words that allow companies to do anything they want to do.

Big bath – How companies take a $2 per share loss and make it into a $4 per share loss so next year’s loss won’t look nearly so bad.

Bottom line – the tip of the iceberg.

Derivative – a financial instrument that is derived with the idea of stealing your money.

Financial instrument
– similar to a medical instrument used for small, dark places.

Off-balance-sheet financing
– a technique used when you can’t find a reasonable place to put the other side of the entry.

Principles vs. rules – a choice of ways that accountants and companies can use accounting standards to confuse investors.

Smoothing – a technique of reversing reserves that shouldn’t have been recorded in the first place.

Stock options – a financial instrument where the company has the option of screwing the IRS or the investors.

One of my favorite ways to use business jargon is through circular definitions – where one term is defined by another unintelligible term. However, sometimes this method can be very informative.

Enron – see Global Crossing
Global Crossing – see Adelphia
Adelphia – see Xerox
Xerox – see Tyco
Tyco – see Health South
Health South – see WorldCom
WorldCom – see Enron

Of course, every one knows that I am just kidding and having a little fun. Obviously a statement of cash flow is really a place where companies hide money they give to influential politicians so real solutions to serious problems will never take place.


Anonymous Accounting Services said...

hey really funny...
great post buddy...
keep blogging...and good luck

3:23 AM  
Anonymous Christine @ accouting cpe said...

A very informative post. It's great that you have defined some terms so that it would be easy for the users to understand them.

Thanks for sharing this blog. Keep it up!

11:44 PM  

Post a Comment

Note: Only a member of this blog may post a comment.

<< Home

Who links to me?