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AAER - An accounting and auditing enforcement release by the Securities and Exchange Commission that details accounting or audit-related violations of the securities law.

Audit Committee - A committee appointed by the Board of Directors to ensure the integrity of the company's financial statements.

Big Bath - A strategy sometimes used by CEOs to manipulate an income statement to make it appear worse than it really is, in order to boost next year's earning performance.

Bill and Hold Practices - Transactions where the buyer requests that the seller hold merchandise until a future delivery date. However, a sale and receivable was recorded prior to physical exchange of the merchandise.

Channel Stuffing - A deceptive business practice used by the corporation to inflate earning figures by encouraging distributors to overbuy under the short-term offer of deep discounts.

Cookie Jar Reserves - A practice where a company borrows money against earnings during good quarters in order to create "reserves"; and in bad quarters, decreases the reserves to inflate earnings.

Creative Accounting Practices - A number of steps that a company can take in order to make its earnings look more appealing to investors than they really are.

Creative Acquisition Accounting - A technique where a larger portion of the purchase price paid for another company is expensed in the year of acquisition rather than written off over a period of future years. The effect is to reduce acquisition year earnings and increase future year earnings.

Earned Revenue - Consideration (usually money or notes) that a company receives after they deliver goods or perform services pursuant to an arrangement where collectibility is reasonable assured.

Earnings Management - Manipulation of earnings in order to reach a target often set by management or Wall Street Analysts. This scheme is also referred to as income smoothing.

EBITDA - An indicator of a company's financial performance. The acronym stands for "Earnings Before interest, Taxes, Depreciation and Amortization".

Extended Amortization Periods - A practice where companies minimize their expenses by capitalizing expenditures that should have been amortized over a shorter period of time.

Financial Accounting Standards Board - The primary organization charged with establishing standards for financial accounting and reporting. The SEC fully supports FASB standards and regulations.


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