DEFINITION of 'Black Box Accounting'

The use of complex bookkeeping methodology in order to make interpreting financial statements time-consuming or difficult. Black box accounting is more likely to be used by companies seeking to hide information that they do not want investors to readily see, such as large amounts of debt, as the information would negatively affect the company's shares or ability to gain access to funding.

BREAKING DOWN 'Black Box Accounting'

Black box accounting is not illegal, as long as it adheres to GAAP or IAS guidelines, depending on the location. But is generally considered unethical, as it is designed to obscure a simple and accurate picture of a company's financial health. The use of complex formulas also creates skepticism about the accuracy of the numbers displayed in financial statements.

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