Harnischfeger corporation case analysis essay

Previously, the cost of the patterns and tooling was expensed in the year of acquisition. Change in the depreciation methods on assets. Given the business conditions Harnischfeger was facing in its primary industries inare these economic assumptions justified?

This teaching note was prepared by Krishna G. Describe clearly the accounting changes Harnischfeger made in as stated in Note 2 of its financial statements.

The net income for is definitely misleading, but even after you account for the effects of the various accounting changes and estimates, they still seemed to perform better than the prior year. Change in the recognition of some types of sales.

Harnischfeger Corporation Essay

Also, the company continued to liberalize its financial reporting policies. Even if capital markets see through the effects of accounting changes, managers may believe otherwise in making accounting decisions.

Effective fiscalthe company changed the financial year ending from July 31 to September 30 for certain foreign subsidiaries. This provides an incentive for the managers to boost profits through accounting changes.

Harnischfeger Corporation - Case Analysis Essay

New management was appointed to turn the company around. EffectiveHarnischfeger began to include in its net sales products purchased from Kobe Steel, Ltd. The instructor should point this out to the class and ask: Without additional research, it is difficult to make conclusive statements on this issue.

This resulted in a change in sales calculation. Harvard Business School Press, The company used the same set of accounting rules for external reporting and for internal management accounting. The potential rationale behind this change will be discussed later in this analysis.

The depreciation method was changed from accelerated to straight-line, applied retroactively to all assets. The potential rationale behind this change will be discussed later in this analysis. This was done mainly to reflect more effectively on the transactions between the corporation and Kobe, since they were now working with a long-term supply agreement which was part of their restructuring plans.

What are the economic consequences of these changes to Harnischfeger and its workers? However, if lenders recognize this possibility, lending agreements would be modified to avoid this possibility as long as the cost of such a modification is not significant.

Students identify a number of these decisions and their profit impact. However, the evidence presented in these studies is not conclusive. I feel that the financial reporting should help rather than hinder the implementation of our operating strategy.

The same underlying reality can be accounted for using a range of assumptions. My own belief is that people adjust for the obvious things like one-time gains and losses but have difficulty in adjusting for ongoing differences.

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.

The accounting studies that examine the stock market reaction to accounting changes conclude that the market is not fooled by the accounting decisions of firms.

Essay Example: Harnischfeger Corporation – Case Analysis

Thus, the consolidated income statement of Harnischfeger included the results of 15 months of operations of these subsidiaries.

The changes made by Harnischfeger and their respective effects on pre-tax profits are as follow: What is the effect of the depreciation accounting method change on the reported income in ? The effect of the changes in the investment return assumption rates for all U.

My own belief is that people adjust for the obvious things like one-time gains and losses but have difficulty in adjusting for ongoing differences. The balance sheet also reflected an improvement in liquidity. Evaluate Accounting Strategy Continuing the discussion of the change in depreciation method, this strategy reduced the annual depreciation expense, increasing net income.

LIFO liquidation means that a company show that it has sold its oldest inventories first. The financial management of the company also seems to be sound. The instructor can sum up the class discussion on question 2 by mentioning the views of the management described above.

Since LIFO means to sell inventory that last came in first, LIFO liquidation occurs when a company makes it appear that it sold its oldest inventory first.

Hernischfeger Corporation Case Analysis

Since the company recently experienced the painful consequences of violating these restrictions, it is plausible that the management changed the accounting policies to avoid future violations of the debt restrictions.

The corresponding percentage in was Financial statements of certain consolidated subsidiaries, principally foreign, had fiscal years ending September 30 while previously these subsidiaries had fiscal years ending July.Financial Reporting & Analysis April 19th, Case Study- Harnischfeger Corporation 1.

Describe clearly the accounting changes Harnischfeger made in as stated in Note 2 of its financial statements. Free Essay: Harnischfeger Corporation Teaching Note INTRODUCTION The purpose of the "Harnischfeger Corporation" case is to expose students to the.

Harnischfeger made two accounting changes from which one made its net sales increase, and the second change made its net income increase. Harnischfeger Corporation. or any similar topic specifically for you.

The case said that they used straight line depreciation method in the accounting change, but it doesn’t mean that the plant and. Harnischfeger Case Essay Harnischfeger Corp case study Case Study Harnischfeger Corporation 1. Identify all the accounting policy changes and accounting estimates that Harnischfeger made during Estimate, as accurately as possible, the effect of these on the company’s reported profits.

Financial Statement Analysis. Read this essay on Harnischfeger Corporation. Come browse our large digital warehouse of free sample essays. Harnischfeger Corporation Case Harnischfeger Corp Depreciation In FebruaryPeter Roberts, the research director of Exeter Group, Overview of Accounting Analysis Harnischfeger Corporation was a machinery.

Harnischfeger Corporation

Hernischfeger Corporation Case Analysis; Hernischfeger Corporation Case Analysis. In the case of Harnischfeger, it benefited the income statement by 2. million in Meaning that the net loss of previous year was reduced by approximately 6 million. ESSAY SAMPLE written strictly according to your requirements.

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Harnischfeger corporation case analysis essay
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