Accounting Cushion

Think about it like the squirrel socking away nuts in good times, knowing that bad times are always around the corner. Now mash up this concept with one of the precepts of GAAP, which is to always be conservative when stating profits.

Companies often purposely overstate expenses to make profits look slightly less awesome in good times, so that when the baddies hit, the downside isn't so awful. Investors appreciate the relative stability of this exercise, and accountants have gotten creative through the years with myriad methods of overstating expenses, from pre-ordering inventory, to overstating the allowance for bed debts, to fully funding (and then some) the employee pension fund. There has almost never been an action against a company for being too conservative in their accounting.