Case Studies
CASE STUDY 1
SEC ENFORCEMENT RELEASE- BRISTOL-MYERS
1. Access the SEC website, www.sec.gov, and do the following:
-go to “Information for Accountants”
-go to “The Division of Enforcement Chief Accountants Office”
-go to “Accounting and Auditing Enforcement Releases” - then go to the enforcement release related to Bristol-Myers dated August 4, 2004.
2. What were the broad areas which the SEC addressed?
3. Of these issues, which one was by far the most significant in terms of dollars involved?
4. Did the SEC allege there was fraudulent conduct? If so, note specifics.
5. With respect to revenue recognition issues noted by the SEC, what source does the SEC cite to support its position? Do you believe this issue is clear cut? Provide pro and con arguments.
CASE STUDY 2
STARBUCKS INVESTMENT ANALYSIS
1. A Starbucks Corp. investment analysis by Bank of America/Merrill Lynch (BA/ML) will be distributed in advance.
2. List several key valuation drivers for Starbucks and why they are important.
3. On page 3, there is an analysis of 2014 guidance changes. Why does BA/ML believe that Starbucks’ guidance as to future expected earnings for 2014 understates trends? Cite several factors.
4. Why do you believe the company discloses its same store sales by various geographical territories? Which territory is the strongest and the weakest? Why do you believe this is so?
5. In establishing its Price Objective, what factors does BA/ML use?
6. Reviewing the Income Statement data on page 5, what income statement captions are most important to Starbucks’ future earnings results? Select the top 3 and indicate why.
CASE STUDY-REVENUE
3-A. SEC STAFF ACCOUNTING BULLETIN 104-REVENUE RECOGNITION
Required: 1. Access the SEC website, www.sec.gov and then do the following:
-go to “Information for Accountants”
-go to “Other Helpful Information”
-go to the Staff Accounting Bulletin (SAB) section to SAB104. Disregard the
SEC ENFORCEMENT RELEASE- BRISTOL-MYERS
1. Access the SEC website, www.sec.gov, and do the following:
-go to “Information for Accountants”
-go to “The Division of Enforcement Chief Accountants Office”
-go to “Accounting and Auditing Enforcement Releases” - then go to the enforcement release related to Bristol-Myers dated August 4, 2004.
2. What were the broad areas which the SEC addressed?
3. Of these issues, which one was by far the most significant in terms of dollars involved?
4. Did the SEC allege there was fraudulent conduct? If so, note specifics.
5. With respect to revenue recognition issues noted by the SEC, what source does the SEC cite to support its position? Do you believe this issue is clear cut? Provide pro and con arguments.
CASE STUDY 2
STARBUCKS INVESTMENT ANALYSIS
1. A Starbucks Corp. investment analysis by Bank of America/Merrill Lynch (BA/ML) will be distributed in advance.
2. List several key valuation drivers for Starbucks and why they are important.
3. On page 3, there is an analysis of 2014 guidance changes. Why does BA/ML believe that Starbucks’ guidance as to future expected earnings for 2014 understates trends? Cite several factors.
4. Why do you believe the company discloses its same store sales by various geographical territories? Which territory is the strongest and the weakest? Why do you believe this is so?
5. In establishing its Price Objective, what factors does BA/ML use?
6. Reviewing the Income Statement data on page 5, what income statement captions are most important to Starbucks’ future earnings results? Select the top 3 and indicate why.
CASE STUDY-REVENUE
3-A. SEC STAFF ACCOUNTING BULLETIN 104-REVENUE RECOGNITION
Required: 1. Access the SEC website, www.sec.gov and then do the following:
-go to “Information for Accountants”
-go to “Other Helpful Information”
-go to the Staff Accounting Bulletin (SAB) section to SAB104. Disregard the