Balance Sheet Dressing

A consulting firm’s examination of close to 1,000 public companies suggests roughly half are focused on short-term, period-end gaming meant to dress up balance sheets.  REL analyzed the filings of 976 of the largest public companies to look for indications that companies are improving the appearance of the balance sheet.  The results of the analysis is that more than 450 of the companies engaged in discounting, enhanced payment terms with customers, stepped-up collection activities, and delayed payment to suppliers.  These actions were to increase the working capital performance. 

There are a number of reasons why a company would try to dress up their balance sheet.  Accounting standards have made it more difficult for companies to commit these actions, but some still find a way.  Although accounting standards dictate the conditions that must be present for recognizing revenue and booking payables and receivables, the actions examined in this study are pinned on ethics and business practices.

To find out how we can help you avoid dressing up your balance sheet, make an appointment with us today at 401-254-0151.  We look forward to hearing from you.