Big Bath in accounting is an earnings management technique whereby a one-time charge is taken against income in order to reduce assets, which results in lower expenses in the future.
[1] The write-off removes or reduces the asset from the financial books and results in lower net income for that year.
This technique is often employed in a year when sales are down from other external factors and the company would report a loss in any event.
In recent times, General Motors and other US corporations have taken huge write downs on balance sheet assets resulting in massive losses.
The same result can be achieved by recording in one year the future cash costs of expected plant closing or employee layoffs.
[2] Other possible reasons why some managers have the incentive to tamper with their company financial reporting is for higher salary and recognition of their abilities to increase profit.
[6] Some predict Samsung will implement the Big Bath technique to have a lower net income in 2016, then will increase in the following years.