Accounting Noise
The effect of complex and extensive accounting rules that regulate financial statement reporting and are thought to distort a company's true operating performance. Investopedia Says:
Accounting noise can be seen as either a consequence of necessary rules regarding generally accepted accounting principles or a result of management's attempts to massage the numbers to present a rosier financial picture of the firm.
For example, a company that has recently undergone a significant merger may look very unprofitable on the income statement; because the merger may cause serious one-time charges for the company, it may be useful for investors to cut through the accounting noise to get a more accurate picture of the company's prospects.
Conversely, an underperforming company could engage in earnings manipulation, creating accounting noise to hide its poor performance. Related Terms:
Aggressive Accounting
Amortization
Balance Sheet
Cook The Books
Cookie Jar Accounting
Generally Accepted Accounting Principles - GAAP
Goodwill
Pro-Forma Earnings
Quarterly Earnings Report |