View Homework Help – Harnischferger Case from ACG at Florida International University. Harnischfeger Corporation 1. Describe clearly the accounting. Agenda Case Facts Strategy Analysis Accounting Analysis. Directions Read the “Harnischfeger Corp” case study and answer the following questions. Submit your completed assignment no later than the last day of Week .
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They wanted to make their financial statements look pretty so that investors would buy their stocks and suppliers would continue giving credit for being able to produce product and sell. When the outside world compares our financial performance with that of other companies, they may or may not take the time and effort to untangle the effects of the differences in financial policies that various companies follow.
A limited time offer! The company adjusted its allowance for doubtful accounts to 6. At some point in the discussion, the instructor should intervene and summarize the evidence from the research literature: Goessel was the president and COO, and Mr.
How will this change affect profits in future years? The company is taking a risk by expecting that the one-time boost in income and cash in will enable the company czse successfully expand internationally and grow in new high tech areas and become profitable once again.
This provides corporattion incentive for the managers to boost profits through accounting changes.
Halsey In this chapter, we will cover the four financial statements that are provided by companies to shareholders and other interested. We will write a custom essay sample on Harnischfeger Corporation specifically for you. This is just a sample.
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The depreciation policy for financial reporting purposes was changed to a straight-line method from a principally accelerated method. How to Write a Thematic Essay. Compute the ratio of the allowance to gross receivables receivables before the allowance in and See Exhibit 4, Notes 6 and 9, in the case. The instructor should ask the class to identify the latter-type decisions among the above.
Change in the allowance for doubtful accounts. For stock prices to reflect reality in an unbiased manner, it is not necessary that everyone in the market has to process the information correctly.
Harnischfeger Corporation | Free Essays –
Students point out a number of possible motives for the accounting changes: But suppose they do not adjust. The effect of the changes in the investment return assumption rates for all U. We would like to tell the world that we are alive and well. The Role of Finance in Business. Previously, the cost of the patterns and tooling was expensed in the year of acquisition.
Change in the recognition of some types of sales. Even if capital markets see through the effects of accounting changes, managers may believe otherwise in making accounting decisions. The cumulative effect of change in there will be no reduction in the depreciation expense due to change. Discussion of Question 2 The above analysis shows that most, if not all, of the reported profits of Harnischfeger in are produced by accounting changes.
There is considerable evidence in finance and accounting literature that shows that the capital markets are generally efficient.
I am not sure whether people make the adjustments or not, but either way we wish to present an optimistic version of the picture and let people figure out what to do with the numbers. Accounting statements are used by investors, lenders, customers, employees, and governments in dealing with Harnischfeger. Do you think this change was motivated by business considerations or accounting considerations? Even thought the changes indicate an optimistic move, it does not guarantee that the company is going to be able to implement its business plan.
Change in the use LIFO liquidation in inventory valuation. The pension plan changes affected positively the statements in We wish to tell the truth but do not want to be overly conservative in doing so. If debt covenants are specified in terms of accounting numbers, managers have an incentive to choose accounting policies to minimize the violation of the covenants.