Monday, May 2, 2016

Book cooking for fun and profit.

Companies are required to publish periodically their profits or losses.  Computation of profit can be pretty slippery.  In principle, profit is gross sales less legitimate expenses.  Legitimate expenses can vary a lot.  When doing the books, any clever accountant can find various ways to make profit come out higher or lower.  When doing the books to show to the taxman, the accountants work real hard to make profit as low as possible, since the company is taxed on profit.  When doing the books to show Wall St investors and sell the company's stock, the same accountants work real hard to make the profit higher. 
  This is natural, not good, but natural. 
  But, in the United States, we allow companies to keep two sets of books, one to show the taxman, another to show to stock buyers.
   This should not be.  We should insist that companies keep one set of books, and the profit they brag about to investors is the profit upon which they pay taxes.  In fact, the IRS could do investors a favor by merely publishing all the company tax returns.  They are public companies after all, and so their tax returns are public information. 

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