Channel Stuffing and Spring Loading - Jargon of the Accounting World

  

Channel Stuffing:
Is a practice where the company tries to bolster revenue artificially by granting unsustainable or improper inducements to wholesalers and customers to get them to take its products.A channel stuffing company may also book revenue by transferring goods to an entity that is not totally separate.

Channel stuffing has been prevalent in the pharmaceutical industry over the years.
 

Spring Loading:When one company acquires another, there is usually a period of several weeks between the announcement of the deal and the actual date at which the acquired company becomes part of the acquirer. In that interim, the acquirer may find a way to book higher level of costs and lower revenue at the company being acquired.

This process, which takes place before the acquired company’s financial statements merge with those of the acquirer, is intended to suppress the profitability of the firm being bought,   solely for the interim period. Once part of the acquirer, the costs and revenue of the acquired firm return to more normal levels, enabling its profit to surge once it can benefit the bottom line of the acquirer.

Courtesy:http://www.nytimes.com/2016/03/29/business/dealbook/valeants-accounting-error-a-warning-sign-of-bigger-problems.html?smprod=nytcore-iphone&smid=nytcore-iphone-share&_r=0