Financial Shenanigans, Fourth Edition: How to Detect Accounting Gimmicks & Fraud in Financial Reports, 4th Edition

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Earnings Manipulation Shenanigan No. 4: Shifting Current Expenses to a Later Period

The Texas two-step is a vibrant country and western dance made popular by the 1980s film Urban Cowboy. Once a simple barn dance, the version of the two-step that is danced today has evolved to include moves borrowed from the fox-trot and swing. Dancers whirl around the floor and routinely swap partners, providing great entertainment for their fellow dancers and for observers as well.

Companies account for their costs and expenditures in a similar two-step accounting dance. Step 1 occurs at the time of the expenditure—when the cost has been paid, but the related benefit has not yet been received. At Step 1, the expenditure represents a future benefit to the ...