Creative accounting is the manipulation of financial statements to present a misleading picture of a company’s financial health and performance. It can involve a variety of techniques, such as using aggressive accounting assumptions, deferring expenses, or prematurely recognizing revenue.
Creative accounting is often used by companies to meet financial targets, such as earnings per share or debt-to-equity ratios. It can also be used to mislead investors, creditors, or other stakeholders about the company’s true financial position.