Search

This case pertains to the interplay of cost accounting, performance measurement, and financial reporting issues in Toshiba's semiconductor business. It addresses how Toshiba manipulated its reported profits by inappropriately allocating its budgeted fixed overheads and not recognizing inventory losses in a timely manner in the financial statements. These manipulations overstated profits of the semiconductor business by ¥36.0 billion, almost a quarter of the total of Toshiba Corporation's ¥151.8 billion profit overstatement. The investigation report indicated that the profit manipulations were a likely outcome of top management's unrealistic expectations. For the semiconductor business of Toshiba, the timely recognition of inventory losses would have offset the profit misstatements resulting from the inappropriate allocation of budgeted fixed overheads. Alternatively, proper allocation of budgeted fixed overheads would have reduced or even avoided the need to recognize inventory losses. The case provides an integrative view of cost and financial accounting. [ABSTRACT FROM AUTHOR]

This case describes how Toshiba, a well-known Japanese conglomerate, creatively used the technique of channel-stuffing to inflate its earnings by $478 million during 2008–2014. Students evaluate the uniqueness of Toshiba's practice of channel-stuffing, determine whether Toshiba's financial statements faithfully depicted the economic reality of underlying transactions, and understand the spiraling effects of channel-stuffing on reported profits. Students also learn that the responsibility for integrity in financial reporting lies not just with the top management, but also with the junior employees. The case requires an understanding of only basic accounting concepts and can be used in a variety of courses, especially in the M.B.A. introductory accounting course, and in the intermediate accounting courses at the undergraduate or graduate level. [ABSTRACT FROM AUTHOR]

This case aims to help you understand how a world-known Japanese conglomerate—Toshiba Corporation—managed its earnings using the percentage-of-completion method to account for construction contracts in its Energy and Infrastructure division. In response to inquiries from Japan's Securities and Exchange Surveillance Commission (SESC) and internal investigations, Toshiba restated its earnings for an extended period (2008–2014) by the staggering amount of $1.86 billion. Twenty-one percent of this amount related to its improper accounting for construction contracts. The case requires you to research authoritative accounting literature, evaluate Toshiba's accounting practices, and determine which GAAP-compliant procedures Toshiba should have followed. The case assignment intends to improve your ability to (1) identify, interpret, and apply the new revenue recognition standard (ASC 606), (2) appreciate the distinction between a company's stated accounting policies and their implementation, (3) recognize the importance of estimates and judgments in the accounting process, and (4) understand the critical role played by the senior management and organizational culture in the assurance of integrity in financial reports. [ABSTRACT FROM AUTHOR]

Diamond Foods is America's largest walnut processor specializing in processing, marketing, and distributing nuts and snack products. This real-world case presents financial reporting issues around the commodities cost shifting strategy used by Diamond's management to falsify earnings. By delaying the recognition of a portion of the cost of walnuts acquired into later accounting periods, Diamond Foods materially underreported the cost of sales and overstated earnings in fiscal 2010 and 2011. The primary learning goal of the case is to help students understand the anatomy and motivations of earnings manipulation. Specifically, students will have the opportunity to (1) apply the FASB's Conceptual Framework to a real-world context, (2) determine the nature of errors and compute their numerical effects on financial statements, (3) understand motivations for earnings management and actions needed for managing earnings of future years, (4) explain the anatomy of financial reporting fraud by reconstructing journal entries, (5) prepare comparative financial statements for retroactive restatements, (6) explain the rationale for clawback provisions in compensation contracts, and (7) understand the difference between the real and accrual-based earnings management. [ABSTRACT FROM AUTHOR]

Max-Value Stores, Inc., a discount general merchandise operator, has initiated a program to sell its own gift cards and those of other retailers. This case provides an opportunity to apply your understanding of various financial reporting topics (revenue recognition, liability de-recognition, accounting changes, and deferred tax accounting) to determine the applicable GAAP (generally accepted accounting principles) for recognizing gift card "breakage," the estimated amount of gift cards that is unlikely to be redeemed. You also must evaluate soundness of the proposals that the management of MVS has made during the process of annual audit to recognize estimated gift card breakage and estimated non-redemption of the restricted gift cards issued during the special Thanksgiving promotion. The case provides you an opportunity to examine several technical and conceptual financial reporting issues in a real-world setting, strengthen accounting research capabilities, understand implications of the choice of an accounting policy for performance measurement and financial statement analysis, and develop critical thinking and professional judgment skills. [ABSTRACT FROM AUTHOR]