Financial Shenanigan Case

Financial shenanigans are acts composed to falsify the actual financial performance of an enterprise or entity. Many public and non-public companies use financial shenanigans to misstate earnings, cover up losses and boost profits. One type of shenanigan that can be utilized by companies is the act of bartering. Bartering is a transaction in which two companies agree to trade goods or services with one another without the involvement of money. The act of bartering, does not affect the company’s cash account, they may not report expenses and they can overstate their revenue on their financial statements. If there is no loss in cash, then the company’s assets on its balance sheet will present no change and be overstated, the net income from its income statement will be overstated because they will probably not report expenses, this will not portray the company’s true financial position and might lead investors to believe the company is performing much better than it truly is.
Assuming I owned a billion-dollar search …show more content…
If I accept a transaction where I received enhancements to my search engine and the other company receives the opportunity to advertise on my search engine in exchange, recognizing advertising revenue violates the revenue recognition principle because I never received money for supplying advertising services.
By using a barter transaction, the company’s financial statements can help the company display outstanding performance. My cash account is not affected by the transactions, I do not report expenses, and I can overstate revenue, which will eventually lead to a higher net income on my income statement. All of my financial statements, especially my income statement, and balance sheet would appeal to investors looking for companies who are high performers through the use of financial