Business Case Studies & Business Publications

Peyton Enterprises

Demers, Elizabeth ...

Case

Peyton Enterprises

Demers, Elizabeth A.; Simko, Paul J.

C-2365 | Published August 25, 2015 | 7 pages Case

Collection: Darden School of Business

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This case provides a context wherein a variety of financial accounting issues can be discussed, particularly those related to the multi-period dependence of accounting accruals. A less direct but nonetheless important issue relates to earnings management and ends up being a central theme of the case. The case focuses on three basic accounting topics?LIFO inventory reserves, the allowance for doubtful accounts, and depreciation policies and assumptions?that span the range of earnings management considerations. It was written as a capstone case for a 90-minute graduate-level introductory financial accounting course. The appropriate audience would be graduate- or undergraduate-level business students, executives, or those studying or working in financial fields. The case lends itself to team-teaching opportunities within accounting, ethics, finance, and leadership.

? Illustrate the potential economic consequences of corporate accounting policy choices and estimates ? Enhance students' understanding of accrual accounting by considering the multi-period effects of accounting policy choices and assumptions ? Develop an understanding of the different possible incentives over the management of earnings (e.g., maximization of proceeds in an IPO, the projection of post-IPO earnings growth, or the maximization of managerial bonuses) ? Provide exposure to the notion of "real" versus accruals earnings management ? Sensitize students to the earnings pressures faced by (newly) public companies and those seeking external financing