Dictionary of Accounting Terms: hidden reserve
hidden reserve
understatement of owners' equity or net worth.This understatement can arise either from the undervaluation of assets or from a complimentary overaccrual of liabilities. For purposes of published financial statements, full disclosure must be made with respect to this departure from standard reporting practices. The ultimate effect of putting up a hidden reserve is that in a future period net income will be inflated by the amount of hidden asset value converted to cash.
