Cookie Jar Accounting

Cookie Jar Accounting refers to an unethical accounting practice where a company manipulates its financial results by overestimating expenses or liabilities in good years, creating a "reserve" or "cookie jar." In future periods, especially when performance is weak, the company can then reduce those reserves to artificially boost profits. This practice misleads investors and stakeholders about the company’s true financial health and can lead to regulatory scrutiny. Overall, it highlights the importance of transparency and ethical reporting in financial statements.