Plunkett and Robert W. Rouse here is a distinct contrast between the management goals of a privately held corporation and those of a publicly held registrant. Typically, the privately held company is more concerned with cash flows than revenues, and external financial reporting may be limited to a few creditors and tax authorities. On the other hand, publicly held companies compete in an atmosphere of widespread and continuous scrutiny.
Plunkett and Robert W.
Rouse here is a distinct contrast between the management goals of a privately held corporation and those of a publicly held registrant. Typically, the privately held company is more concerned with cash flows than revenues, and external financial reporting may be limited to a few creditors and tax authorities.
On the other hand, publicly held companies compete in an atmosphere of widespread and continuous scrutiny. In other words, publicly held corporations have the added concern of meeting the expectations of shareholders and analysts and thus desire a positive trend of favorable financial reporting.
In this environment, public companies may attempt to "manage" earnings. GAAP, while not offering as many opportunities to manage earnings as accounting principles in other countries, does permit some management discretion via the adjustment process.
For example, management might be able to tweak the amount of the bad debt provision to produce an extra penny out of earnings per share. Beyond these discretionary opportunities, managements of publicly held companies may be tempted to "push the envelope" in the interpretation of events to favorably impact their bottom lines.
Revenue recognition is one of those areas where aggressiveness can accomplish this goal.
Cost Accounting of Bausch & Lomb Incorporated Bausch & Lomb is an eye health company that began in Rochester, New York, in (Bausch & Lomb, ). accounting choice. Bausch & Lomb, Inc. (A) Remember B&L can also sell accounts receivable attributable to the sales Documents Similar To Bausch & Lomb_case Analysis. bausch_lombcasestudy. Uploaded by. Asif Khan. Grennell Farm. Uploaded by. Prateek Chaudhary. Valeant Acquisition of Bausch & Lomb. Uploaded by.5/5(1). Case Study Recommendation Memo Assignment. At Fern Fort University, we write Bausch & Lomb, Inc. (A) case study recommendation memo as per the Harvard Business Review Finance & Accounting case memo framework.
Aggressiveness, however, must be tempered with reason and with the realities of the situation. A concise analysis of the applicable GAAP will then be presented, and lessons that can be learned from the investigation will be discussed.
The contact lens division CLD is responsible for U. In the early s, the company faced strategic challenges. In latemanagement concluded the CLD would have to reallocate its marketing efforts to meet its goals.
The CLD sold its products primarily through two channels: A plan was formulated to give the distributors the primary sales responsibility for the traditional lenses so the direct sales force could concentrate its efforts on selling disposable lenses.
The CLD had met or exceeded expectations for 48 consecutive months between and Early in the fall ofhowever, the division was not on target for meeting its goals, and the president of the CLD met with his staff to assess the opportunities for sales growth.
A new promotion was formulated whereby the CLD would sell lenses to distributors significantly in excess of past sales.
Discounted prices and extended payments were offered, and the promotion produced sales that surpassed third quarter forecasts. This success was not without a price to the CLD, however, because the additional sales in the third quarter meant the distributors had purchased inventory in excess of fourth quarter needs.
Thus, it immediately found itself falling short of fourth quarter expectations in an already saturated market. The December program did not assess the demands of distributors as the available inventory was divided among distributors according to their pro rata share of past distributor sales.
Acceptance of the program was necessary for authorized distributors to retain their status with the company. As evidence of the December program obligations, the CLD asked distributors to sign notes with June maturity dates for their purchases.
Although most distributors refused to sign the notes, only two distributors refused to participate in the December program. The CLD also offered distributors access to large retail accounts and other incentives, concessions, and variations from the original terms in the program.
Internal estimates prepared by the CLD indicated that some distributors would need as much as two years to sell the quantities they were expected to buy in the last two weeks of the fiscal year. Shipments of the additional merchandise to distributors were made without required credit analysis.
Other questionable business practices of the December Program included the following: Representatives of the CLD granted some distributors the right to return unsold lenses. Lenses were shipped to warehouses rented by CLD employees to accommodate delivery schedules of distributors.
The CLD did not force distributors to meet obligations as promised in the notes. Fictitious sunglasses sales for the Asian Pacific Division were initiated by phone calls or by orders on stationery that appeared genuine.
APD warehouse personnel received instructions from management to deviate from normal processing and delivery procedures. Supporting documentation was generated as if the sales were legitimate, but warehouse staff were instructed to ignore the addresses on the delivery notes and forward the merchandise to a warehouse.
The merchandise was titled in the name of a freight forwarder. Receipt acknowledgments were either forged or obtained from cooperating customers.
These apparently fraudulent transactions were augmented by "refreshing" transactions. Management had to mask the rising account receivable balances while avoiding increasing the bad debt provision.The lessons of the Bausch & Lomb case seem pertinent again in , nomic substance of their activities.
The story At the time of its accounting scan-dal, Bausch & Lomb was one of the longest established companies in the US. It was proud of a heritage that began as early as , when John Bausch, a German immigrant, set up an .
Nov 14, · Finance & Accounting Case Study. Chris A. Higgins; Add to cart. Every year MBA programs across the country advertise for prospective students. They promote the academic excellent of . September Issue. ACCOUNTING. REVENUE RECOGNITION AND THE BAUSCH AND LOMB CASE.
By Linda M. Plunkett and Robert W.
Rouse. here is a distinct contrast between the management goals of a privately held corporation and those of a . Bausch & Lomb introduced (B & L), an aggressive sales program from fiscal year, which pushed in recent weeks, a large amount of inventory on dealer. Home» Bausch & Lomb Inc.
(C) Bausch & Lomb Inc. (C) HBS Case Analysis This entry was posted in Harvard Case Study Analysis Solutions on by Case Solutions. The lessons of the Bausch & Lomb case seem pertinent again in , nomic substance of their activities.
The story At the time of its accounting scan-dal, Bausch & Lomb was one of the longest established companies in the US. It was proud of a heritage cream on the returns from Bausch June The Bausch & Lomb audit team begins work in.