Aggressive Accounting

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DEFINITION of 'Aggressive Accounting'

The practice of misreporting income statement and balance sheet items to make a company appear more attractive to investors. Although some forms of aggressive accounting are illegal, others are not. Regardless of the legality, however, aggressive accounting practices are universally frowned upon, as they are clearly designed to deceive. Aggressive accounting is also known as "creative" or "innovative" accounting and in the worst, most fraudulent cases, is referred to as "cooking the books."

BREAKING DOWN 'Aggressive Accounting'

Though aggressive accounting has been an issue for a long time, the problem didn't come to a head until the dotcom era in the late 1990s and early 2000s. Following the bankruptcy of Enron Corporation (formerly traded as "ENE" on the New York Stock Exchange) in 2001, Congress and the Senate passed the Sarbanes-Oxley Act. Sarbox, or SOX, set new or enhanced standards for all U.S. public companies, as well as public accounting firms, and was named after the bill's sponsors, U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH).

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