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1、PARTAa)TheaimsofcreativeaccountinginreducinggearingandincreasingEPSDefinitionCreativeaccountingisthedeliberatemanipulationofaccountingrulestopresentanobsequiousimageofthefirm.Thisinvolvesdampeningoffluctuationstosomedegreeofearningsconsideredtobeacceptablebyusersoffinanc
2、ialreports(Amatetal.,1999).Thetechniqueisaimedattransformingsomewhatdullfiguresinordertopresentaccountsmoreattractive.UseofcreativeaccountinginreducinggearingInordertoreducegearing,firmsuseoffbalance-sheetfinancing.AccordingtoO'Regan(2006,p342),offbalance-sheetfinancingi
3、stheprocessthroughwhichassetsintimatetofinancingarekeptoffthebalancesheettoreducegearing.Thisisaimedataffectingthegearingofafirm.Inotherwords,theapproachreferstosourcingoffundsforthebusinesswithoutreflectingthetransactionsonthebalancesheet.Themethodhasnotonlyincreasedina
4、pplicationbutalsointermsofsizeandsophistication(O'Regan,2006).Themainstrategyistoreduceborrowingsonthebalancesheetsoastocutdownthegearingratio.Inaddition,themethodmayinvolvesecuringofborrowingsforimplementationofimportantprojectsoracquisitioninfuture.Regardlessofthemanne
5、rinwhichonelooksatit,itrepresentsmanipulationofthecompany’struefinancialposition;thus,limitingthetrueandfairunderstandingofacompany’sstateofaffairs,andmayleadtowronginvestmentdecisionmaking.Therearenospecificrulestooffbalancesheetfinancingtechnique.Itowesnothingtocompany
6、laworanyparticularrules—anythinggoes.Likeanyotherborrowingtechniques,offbalance-sheetfinancemustberepaideventually.Thebusinessmustfulfilitsfinancialcommitments,betheyonoroff-balancesheet.Byfailingtofullydisclosethesefacts,thebusinessmayfinditselfatthediscretionofprovider
7、sofsuchfinancing.Inasmuchasoffbalance-sheettechniquemayappeartomisleadonlytheoutsidersandactasabreatherforthecompany,itisactuallyadoubleedgedsword.Itisunderstandabletouseoffbalance-sheettechniquetosolveshort-termfinancialproblemsinatactful,subtleandself-effacingmanner.Se
8、ttingasidethemoralissue,companiescanuseoffbalance-sheettechniquetomaintaintheirliquidity.Thereisnoclear
