Financial statements purport to be decision-useful. However, managers can manage the financial statements thereby impairing their credibility and misleading the stakeholders. Financial statement management is likely to be more pervasive in banks due to the presence of greater incentives and scope. But the implications of the same can be far reaching as loss of public confidence on banks can lead to liquidity crunch threatening the stability of the entire financial system of a country and spreading the contagion beyond. The potential to manage the books can be expected to be higher in Indian banks due to poor transparency.Further government ownership and social controls make the case of Indian banks very unique. This work examines the books of Indian banks for potential income smoothing, capital management, tax minimization and dividend stability focusing on accrual based or real action based tools.It also discusses interdependence and the role of economic factors in the use of these tools. Regulators, Accounting authorities, professionals and academicians will find the book very useful, particularly in the context of Basel norms and fair value accounting lately introduced in India.
