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Sierra On-Line, a fast growing software developer, is criticized by a Forbes journalist for excessively capitalizing software development costs. In contrast to most other software developers that typically capitalize about 20% of R&D costs, Sierra capitalizes 80%. Questions investors must address in valuing Sierra include: Does Sierra's account reflect economic reality? Is their accounting too aggressive or are their competitors too conservative? Is Sierra's business sufficiently different from its competitors to invalidate the comparison?

In June 1989, a banker must decide whether and how his bank should participate in the LBO of this small Scottish newspaper publisher. This is the first of a two-case series and may be taught by itself or as part of a sequence over two class meetings with the B case (UVA-F-1013). See also the abridged version (UVA-F-1011). Student and instructor worksheet files are available for use with this case and teaching note.

Continues the story of the implementation of the ARES project.

LaPeux Eau de Toilette focuses on inventory valuation of a merchandising company. It tests students' understanding of LIFO, FIFO, weighted-average cost, lower-of-cost-and-market rule, FOB destination, FOB shipping point, purchase discounts and duty and taxes on importing. The president and owner, Nicolette LaPeux, is the decision-maker faced with the task of assessing how the accounting methods used in the inventory valuation affect the overall financial position of the company.

Introduces the concepts of responsibility centers and performance measurement. Expense centers, financial responsibilities such as profit centers, and investment centers are introduced, defined, and illustrated with simple examples.

This case introduces the statement of cash flow through three examples of multi-year statements of cash flows from three unidentified companies.

A small manufacturer needs additional financing for expansion and production improvements. A bond issue would provide needed funds, and a zero-coupon bond would delay payments until funds provided by operations were available. Present value tables are included.

A new company producing computer games must begin to capitalize computer software development cost. To do so requires a cost accounting system, decisions about which costs to capitalize, and how to match costs to future revenues. Teaches accounting standards for computer software development costs.

This note introduces students to some of the options that managers consider when financing is needed. Internal financing options such as improving operating cashflow, adjusting working capital and disposing fixed assets are examined. The advantages and disadvantages of external financing options (i.e., debt or equity) are also briefly covered.

The pharmaceutical division of a diversified company has been asked to develop a Balanced Scorecard. Research and development projects take about ten years to bring a new product to the marketplace and the division depends on good relations and active feedback from its customers for continued success. But currently, the division is evaluated by meeting monthly financial objectives. The case describes an early and less-than-successful attempt to develop a Balanced Scorecard encompassing financial, customer, internal process, and innovation perspectives.

An introduction to processes by which indirect costs are first assigned to cost centers and then assigned to products or services produced. A simple schematic illustrates how expenditures are assigned to service centers or production centers, service centers to production centers, and production centers to products.

An introduction to standard costs and cost variances. Discussion, formulae, and examples introduce the idea of comparing actual costs to those that were expected.

Provides an introduction to the diversity of generally accepted accounting principles. An example shows how financial reports in one firm could differ depending on accounting methods and principles selected. Presents arguments that this may be a problem, an imperative for change, or a strategic opportunity for managers.

An introduction to accounting for owners' equity and leveraged buyouts. Covers classes of shareholders, treasury stock, stock distributions, and dividend accounting.

Spreadsheet Supplement for case 193049

Spreadsheet Supplement for case 193053

Summit Distributors was in danger of violating loan covenants because of slow economic activity and forecasted losses and was faced with a choice. Changing the inventory valuation method from LIFO to FIFO would avoid default but would require higher future income taxes. Not changing could mean default on covenants, renegotiating loan terms at less favorable interest rates, or possible bankruptcy.

Describes the outcome of the deliberations at Summit Distributors. To be distributed in class following discussion of the (A) case.

An introduction to accounting for liabilities. Both current liabilities and long-term debts are described, and illustrations of bond interest calculations and financial reporting formats are included.

Explains the principal differences between traditional cost accounting systems and activity-based costing systems.