Indeed this concept has existed for a long time, and the ocean is endless for those practicing accountant, audit professional to discover it actually.

Creative Accounting is applying a flexible and innovative techniques in accounting, also known as the "tricks" to "twist" the information on the financial statements in order to influence perceptions read the financial statements.

According to Charles W.Mulford and Eugene E.Comiskey (2002) said that creative accounting is the deliberate choice of accounting rules to manipulate profits, to aim to by all levels of management or to as profits become more beautiful.

Accountants can visualize creativity (Creative Accounting): includes all tips from Aggressive Accounting, Earning Mannagement, Income Smoothing:

• Hard Accountants (Aggressive Accounting): The deliberate choice of accounting operations based on accounting principles for the purpose of achieving the desired results, based on GAAP.
• Yield management (Earning Management): The profit manipulation toward a previous goal has been made by the managers and analysts of the company, or to make profit becomes more beautiful.
• Soften profit (Income Smoothing): A form of Earrning Management was created to avoid the fluctuations of income in other words, beauty income, reduce income or high-income years to reserve for low income years.
• Fraud report (Reporting Fraudunt): Intentionally misstatement or omission in the financial statements in order to deceive users reported.

Thus, despite the different names are creative Accounting or Management profit, then that is a job change profit figures, is done through behavioral adjustments in revenue and cost accounting tools panoramic. Depending on the accounting rules to be issued, it can prevent as well as opening up a new way for administrators to achieve profitability goals.

Content and method of implementation creative accounting

The implementation of creative accounting to adjust the profits of businesses are plentiful. The method of accounting for revenue, market capitalization, recognized assets or liabilities may alter the numbers on financial statements:

(1) Selection of the accounting methods affect the time of revenue recognition and cost

Choice of accounting method affects the time of revenue recognition and expense (and the resulting impact on profits recorded time). Selecting one (or several) accounting methods allow earlier revenue recognition and cost shifting later recorded increases reported profits during the period and vice versa. In the enterprise accounting system, there exists a number of methods that can be used to recognize revenue, costs:

Percent completion method to recognize revenue and costs in the provision of services and construction contracts. This approach allows companies recorded a turnover greater or smaller in proportion to the actual progress of the estimated contract;

The method of valuation of inventories (on average, first in-first out, by name) influence substrate COGS recorded in the period, and thus, affect the profit reported in the period;

Select the method of depreciation. Each depreciation method (straight line, use rate, declining balance adjustment) for various depreciation costs. Since then, affect profits in the period.

(2) Select the time of purchase or sale of assets

Selecting the time of purchase or liquidation or sale of fixed assets also affects the accounting profit. DN administrators can decide when and extent of advertising costs, cost of repairs, upgrading of fixed assets write-offs. Administrators can also decide when the liquidation or sale of fixed assets to accelerate or slow down the recognition of profits or losses from other activities. Accelerate or delay shipments to customers at the time near the end of the year may also affect reported profit target for the year.

(3) Option costs recorded time and the accounting estimates

Accounting mode also allows businesses allowed to apply the accounting method selected through recorded time expenses. Administrators decided to shift later (or earlier noted) some sort of cost would decrease (or increase) the cost of the current year. The costs can shift the time of recognition include: fire insurance costs, the value of tools and instruments to allocate more periods, large repair costs of fixed assets, advertising expenses, expenses product warranty expenses. These types of costs that can be recognized in the year incurred or allocated to a number of periods (based on consistent principles).

DN administrators can choose when and how to record events related to profit targets for the year. For example, the timing and level of redundancy required to make an inventory of stock and doubtful; point of this provision is reversed or eliminated and the reversal. DN also can estimate (accruals) some costs as product warranty costs, warranty costs and construction works, the completion rate estimated construction contracts and service providers to record sales revenues and expenses, estimated implicit interest rate of the lease property for rent cap in a financial lease contract. Estimated time of useful life of fixed assets may also be made to adjust the depreciation cost (although the range is not large).

Conclude

(1) In terms of the negative: When using creative accounting with no positive purpose, it can be a tool for those who are corrupt or concealed business activities of the company are reduced. These include a number of acts, such as:

Increase the ability of enterprises to mobilize capital, or to persuade investors to pour capital into businesses when the borrower or credit institutions, regulators have sought to adjust the profits to raise funds at low cost than. And that will lead to acts of enterprises will have adjusted earnings to avoid violating the terms

Avoid being adjusted from the state agencies, such as forced selling prices or subject to floor prices in some particular time; companies (electricity, petrol ...) tend to choose the accounting method reduces profits.

Gain personal benefits (such as bonuses, raises, positions are ...) that the director can enjoy many rights or owns more shares, the directors of enterprises can be adjusted profit increased to achieve their goals.

Reducing the state taxes paid; DN will report the accounting profit with a low to reduce the amount of tax payable

Since then the implementation of creative accounting can not be less harmful to the state, the investors and the country's economy.

(2) In terms of the positive: the performance itself creative accounting is not negative behavior. It only carries negative connotations when the engine of the implementation is to create false information to fool those who are interested in the financial statements of companies only. It makes a positive impact on their businesses, and investing in the right direction for the future investors. Depending on the accounting rules to be issued, it can prevent as well as opening up a new way for administrators to achieve profitability goals.

In summary, the application of creative accounting in the post is legitimate because the technical adjustments in the accounting regimes of Vietnam and the current regulations allow. However in the context of Vietnam has joined the TPP and AEC, the demands on financial transparency is very high. So the government should issue some more strict rules regarding presentation of the financial statements of companies, especially listed companies, in order to minimize the negative aspects of creative accounting