What does the term 'window dressing' refer to in financial reporting?

The term 'window dressing' in financial reporting refers to the practice of manipulating financial statements to present a more favorable picture of a company's financial performance than what is actually the case. This can involve actions such as altering accounting methods, timing transactions to improve reported results, or selectively highlighting certain figures while downplaying others.

Window dressing is often done to impress investors, analysts, and stakeholders, especially before the release of financial results or an annual report. By making financial results appear stronger, a company can influence perceptions and potentially secure better financing, maintain stock prices, or achieve other strategic objectives.

The other choices do not accurately capture the essence of window dressing. Recording accurate sales figures, standardizing accounting practices, and disclosing all financial liabilities would represent transparency and adherence to proper accounting principles, which stand in contrast to the concept of window dressing.