ACCA FR Syllabus C. Analysing And Interpreting The Financial Statements - Manipulating Financial Statements - Notes ^{2 / 4}

Example 1 - Using Provisions

• Create an unnecessary provision in good times (this reduces profits)

• Release this provision in bad times (this increases profits)

The effect of this is a smoother profitability rather than big up and down swings (which investors don't like)

Cash Postpone paying suppliers, so Y/E cashbooks good

Receivables Record an unusually low bad debt provision

Revenue Offer early shipment discounts to get revenues in current year

Expenses Withhold supplier payments, so that they are recorded in a later period.