We first voiced our concern about an obscure accounting rule that allows companies to “create” profits when purchasing other businesses in the “Curious Case of Miller Energy’s 10-K and Its Huge Bargain Purchase.” The offending tenet relates to the treatment of something called “negative goodwill” which purportedly is created when a company makes an acquisition, [...]
Well, it’s happened yet again. Groupon is making these two Grumpy Old Accountants look like prophets of financial reporting transparency. Last August we warned you of revenue recognition problems and internal control weaknesses at Groupon (Trust No One, Particularly Not Groupon’s Accountants). Both predictions have since proven to be fact.
Abraham Briloff complained that sometimes the accounting standard setters do a pathetic job by creating rules that enhance the ability of managers to manage earnings. At those times, he indicated that GAAP becomes cleverly rigged accounting ploys. The CRAP acronym is tart, but precise.
In our February essay “Facebook Gets an ‘A’ in Financial Reporting,” the two of us discussed what we liked about the firm’s S-1 filing. We felt that Facebook demonstrated financial reporting transparency and didn’t attempt to buff up earnings with any nonsense about EBITDA or similar metrics. Revenue recognition seems simple and appropriate. Operating cash [...]
Last time we discussed Rite Aid and claimed the balance sheet was in shambles. Some fellow accounting professors objected to the analysis, so we need to respond to them. We’ll answer the criticism and point out the big point that they all missed.