Question

-Explain window dressing in accounting and is it ethical to use it ( give examples on famous companies who has used window dressing).

Answer 1

Answer: Window dressing is involving or no involving in transaction that makes financial statements look attractive.

Unethical example: Lehmon Brother Holding Inc regularly used to move $50 Billions from their liability side off the balance sheet at the last day of every quarter to make their financial statements more attractive. Which resulted in a huge stock market crash after the bubble was burst.

Ethical Example: A Mutual Fund company has some stock in their portfolio of a scheme. Now Stock A has negative return of -8% and Stock X, Stock Y, Stock Z has the return of 20%, 10% & 8% respectively. Now at the end of the period he buys more stock of Stock Z and sells the stocks Stock A. Now the portfolio does not include non performing stocks of Stock A and includes well performing stocks of Stock Z. This makes the portfolio strong, performance wise as well as structure wise.