WorldCom: Capitalized rather than expensed expenditures to maintain transmission lines.
AIG: Booked debt as revenue.
Lehman Brothers: Sold toxic asset (i.e., financial investments) to other banks with a buyback agreement, removing the toxic assets from its books.
Saytam: Created fictitious revenue recognition journal entries.
A company may try to paint a favorable picture of itself by accelerating the timing of revenues or estimating the collectible amounts too aggressively. In these cases the quality of accounting information declines because it does not represent the company's true economic condition and may not be sustainable. List two conditions which might suggest that a company is recognizing revenues too early?
Briefly define and give an example for accrual manipulation and real activities manipulation. What is the main difference between the two methods of manipulation?
Discuss the economic characteristics of firms that have the following mix of profit margin and asset turnover. In addition, provide an example of an industry that would have the relevant profit margin asset turnover mix: A. High profit margin and low asset turnover
. Discuss the economic characteristics of firms that have the following mix of profit margin and asset turnover. In addition, provide an example of an industry that would have the relevant profit margin asset turnover mix: B. Low profit margin and high asset turnover
Condition A: Increasing cost of goods sold to sales percentage, coupled with an increasing inventory turnover.
