Accounting Noise
 |
Definition of 'Accounting Noise'The distortion that is caused in a company's financial statements due to accounting rules and regulations that must be followed. Accounting noise makes it difficult for investors to easily ascertain a company's true financial condition. Accounting noise can make a company's financial reports look better or worse. |
 |
Investopedia explains 'Accounting Noise'Accounting noise can be seen as either a consequence of necessary rules regarding generally accepted accounting principles (GAAP) or a result of management's attempts to massage the numbers to present a rosier financial picture of the firm. Paying attention to the footnotes can help an investor cut through the accounting noise and get the real story.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 Definitions
Articles Of Interest
-
Understanding Pro-Forma Earnings
These figures can either shed light on a company's performance or skew it. Find out why. -
The 5 Types Of Earnings Per Share
A look at the five varieties of EPS and what each represents can help an investor determine whether a company is a good value, or not. -
The Importance Of Corporate Transparency
Clear and honest financial statements not only reflect value, they also help ensure it. -
Pay Attention To The Proxy Statement
Don't overlook this overview of a company's well-being. -
Explaining Amortization In The Balance Sheet
Amortization is important to account for intangible assets. Read to find out more about amortization. -
Top 4 Most Competitive Financial Careers
If your goals include a big paycheck and working for a Wall Street firm, then you need to learn how to meet employers' expectations. -
A Day In The Life Of A Public Accountant
Here's an inside look at the workdays of two experienced CPAs, to give you an idea of what it might be like to pursue a career as a public accountant. -
Earnings Guidance: Can It Accurately Predict The Future?
Explore the controversies surrounding companies commenting on their forward-looking expectations. -
Depreciation: Straight-Line Vs. Double-Declining Methods
Appreciate the different methods used to describe how book value is "used up". -
Financial Statement: Extraordinary Vs. Nonrecurring Items
When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ...
Free Annual Reports