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Chapter 8. Earnings Tricks and Games: Ma... > Red Flag 5: Serial Acquirers Who Dis...

Red Flag 5: Serial Acquirers Who Disguise Performance with the Next Big Deal

Companies can use acquisitions to artificially boost earnings in a number of ways. One of the easiest is the manipulation of a target company’s results around the time an acquisition is completed. By raising its costs just before that key date (through, for example, getting management to pay staff bonuses and other expenses before they were due), the company can reduce the costs of the business in the year after acquisition. It can play a similar trick with revenue by delaying the booking of sales until after the completion, boosting sales performance later.


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