Define the term 'window dressing' with reference to published accounts.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [2] Window dressing is where company accountants present their published accounts in a very favourable way to shareholders/investors in order to give the appearance of a well-run company and/or to attract more investment.
2. [1] Published accounts may be 'window dressed' to give a minimum amount of information - significant information is not disclosed so important information is not included in the published accounts.
3. [1] Published accounts may be 'window dressed' to give a boost to the short term performance of a business and hence a misleading and inaccurate statement is given.
4. [1] This window dressing may well be legal but has the effect of reducing the accuracy and reliability of published accounts.
5. [1] Comparability with previous year's accounts and with competitor accounts is compromised.
6. [1] In consequence the usefulness of 'window dressed published accounts can be significantly undermined e.g. the ability to monitor, evaluate, and call to account a business through examination of published accounts is weakened.
7. [1] (Example) postpone paying suppliers so that period end cash appears higher than it should be.
8. [1] (Example) sell assets at the end of the financial year to give more cash and improve liquidity position.
9. [1] (Example) reduce the amount of depreciation of fixed assets to increase declared profit.
10. [1] (Example) record an unrealistically low 'bad debts' amount.
11. [1] (Example) giving stock values a higher value than they are really worth.
12. [1] (Example) accelerating revenues from a future period into the current period.