Hiding Debts May Become Illegal Fast

There are many questionable accounting practices that some companies get involves in from time to time. The idea of the accounting tricks are always to try and make the company look better to investors when they are trying to make determinations about how a company is doing. The companies want to look good so that they will be able to either retain money in their coffers or gain more money from new investors. The worst part is that many of the accounting practices are perfectly legal. Immoral, but legal.

The Securities and Exchange Commission (SEC) is looking to change all of this. One of the things that they want to put a stop to is the practice of selling assets to other companies in order to buy them back after reporting the quarterly statements. This is known as ‘short-term borrowing’ and it is completely legal to do. Worst of all, there is nothing which states that they have to announce these borrowing methods on the quarterly reports. They only have to state it on the annual reports.

One of the reasons why the SEC wants this practice to stop is because it defrauds those looking to find out what is going on in the company. If they go the true picture about companies like Lehman Brothers Holding Inc., they would see that the company is more in the market for the target of debt consolidation leads than the growing company they made themselves out to be. By looking at the holdings of the company right after the quarterly report, you would see a very different picture – one that is closer to the truth.

Measures Being Taken

Currently the SEC is investigating 19 other companies which appear to have engaged in the same kinds of activities as Lehmen Brothers were involved in. They have asked them to talk about their accounting practices and what it can mean to the investors for the companies.

While it is not likely that they will make the companies see that it is better for them to invest in debt consolidation rather than in defrauding the investors, it will at least help to pave the way to new regulations. This is done by taking a realistic look at the dealings of the companies in question and seeing if it is causing a negative impact on the investors of the companies which have engaged in questionable accounting practices.

The regulations which have been proposed will first have to be agreed upon by those in the SEC and then they will have to be agreed upon by the companies and the investors before going back in for a second vote. The lengthy process will likely allow the companies to continue in stealing money from investors, but it is good to see that action is being taken to allow the companies with the ability to act with a sense of propriety to get rewarded for their good business sense and honesty about their performance.