Big Bath Accounting

Big Bath Accounting is a financial strategy some companies use to deliberately report large losses in a single period, aiming to clean up their balance sheets. By recognizing excessive expenses or write-downs all at once, they can make future earnings appear much stronger. This tactic is often employed during a tough financial year or when new management takes over. The idea is that once the “bad news” is out of the way, the company can show improved performance in subsequent periods, portraying a healthier outlook to investors and stakeholders.