Investopedia

Continue to Site »

Safe Harbor

Filed Under » , ,
Dictionary Says

Definition of 'Safe Harbor'

1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated.

2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. In effect, this gives the target company a "safe harbor."

3. An accounting method that avoids legal or tax regulations and allows for a simpler method (usually) of determining a tax consequence than those methods described by the precise language of the tax code.
Investopedia Says

Investopedia explains 'Safe Harbor'

1. In the first case, under SEC rules, safe-harbor provisions protect management from liability for making financial projections and forecasts made in good faith.

2. When trying to scare away sharks, it sometimes helps to stink up the water.

3. Here's an example of an accounting safe harbor: a firm is losing money and therefore cannot claim an investment credit, so it transfers this claim to a company that is profitable and can therefore claim the credit. Then the profitable company leases the asset back to the unprofitable company and passes on the tax savings.

Articles Of Interest

  1.

    Earnings Guidance: Can It Accurately Predict The Future?

    Explore the controversies surrounding companies commenting on their forward-looking expectations.

  2. Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.

  3. The Advantages Of Investing In Aggressive Companies

    Often the most attractive companies are also a little fierce - learn how to spot healthy corporate aggression.

  4. The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.

  5. Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.

  6. Arbitrage Squeezes Profit From Market Inefficiency

    This influential strategy capitalizes on the relationship between price and liquidity.

  7. Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".

  8. 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 ...

  9. Get A Career In Showbiz Accounting

    An accounting career doesn't have to be boring. If you love numbers, but want excitement as well, consider the field of showbiz accounting.

  10. Warding Off Hostile Takeovers

    The purpose of this article is to provide a general overview of hostile corporate takeovers, while highlighting a general course of action against such activity. This article provides basic ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.

  2. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  3. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  4. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  5. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  6. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
Trading Center