ABSTRACT:

This case illustrates how accounting rules impact the public interest and vice versa. The setting is a gray area of accounting in which management, the external auditors, the SEC, and international accounting standard setters may have differing opinions about the accounting treatment. Students consider the situation in which an accounting rule leads to a business and societal problem. They gain an understanding of how this happens and how such problems can be addressed. The context for this case is a revenue recognition issue for bill-and-hold sales. It also provides students with the opportunity to consider the real-world implications of accrual- versus cash-based accounting. This case is useful for intermediate- to graduate-level financial accounting classes or an accounting capstone class.

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