Creative Accounting and Its Impact on Financial Statements
Creative accounting responds to the same issue faced by the management, but the answer lies at the boundary between the legal and de facto recording of the economic event, leaving accountants to create the entity's economic reality. The manager of the entity can choose from the multitude of accounting treatments and policies, the one that is most convenient and responds best to their own interests, which implies that the outcome may be convenient and not necessarily true. This chapter presents the implications and challenges of creative accounting on financial statements. The results show that the main controversy raised by the standards refers to the need for periodic reassessments and the possibility of choosing a method of measuring the value, which creates premises for the practice of creative accounting.