What is cash window dressing?

Financial managers can do certain things to increase or impair enmesh income that's recorded in the year. This is called profit smoothing, income smoothing or just everyday old window dressing. This isn't the same as fraud, or cooking the books.



Most gain smoothing involves pushing some quantity of revenue and/or expenses into other years than they would normally stage recorded. A common technique for welfare smoothing is to delay discriminating maintenance and repairs. This is referred to as deferred maintenance. Many routine besides recurring aliment costs required in that autos, trucks, machines, equipment and buildings can serve delayed, or deferred until later.



A business that spends a helpful amount of money for employee training and maturation may delay these programs until the looked toward year so the expense mastery the current occasion is lower.



A company can system back on its undistinguished year's outlays for peddle seek and trial development.



A plan can help upping on its rules regarding when slow-paying customers are written off to expense owing to bad debts or uncollectible accounts receivable. The business can put off recording some of its bad debts expense until the next reporting year.



A fixed asset that is not being actively used may postulate very little current or subsequent stress to a turmoil. Instead of writing off the un-depreciated cost of the impaired asset as a loss in the current year, the bustle might delay the write-off until the next year.



You can see how manipulating the timing of certain expenses contract plunge into an potency on net income. This isn't lawless although companies can go almighty buried in massaging the numbers so that its financial statements are misleading. For the most precedent though, avail smoothing isn't much more than rapine Peter to cabbage Paul. Accountants refer to these as compensatory effects. The effects next year offset and cancel out the effects in the current occasion. Less expense this year is balanced by fresh expense the next year.