A friend seemed surprised that her employer appeared to be using company-wide layoffs to get rid of underperformers. She had not realized that generally accepted accounting principles (“GAAP“) indirectly encourage this: When a company does layoffs, it can often segregate the severance costs as part of a one-time charge, instead of recording those costs as ordinary business expenses for the quarter. In theory, the latter approach makes the company’s financial results look better.
Layoffs provide opportunity to clear out deadwood while putting severance costs into one-time charge
{ 0 comments… add one }
Follow me
Signing a business contract: