This an assignment for 8 pages in a word document and an excel
document
Back to the Future” (Or How a Product, Sold Almost 60
Years Ago, Resulted in a Current Financial Statement Restatement)
Read the following Case Study:
Franz, D. R. (2018). “Back to the future” (or how a product
last sold almost 60 years ago resulted in a current financial statement
restatement)Links to an external site.. Issues in Accounting Education, 33(2),
9–17.
Answer the following questions:
In preparing your answers for questions 1 to 4, you will
need to refer to OI’s amended 10-K for 2015, which can be found by clicking
hereLinks to an external site..
Website for amended 10-K for 2015: https://www.sec.gov/Archives/edgar/data/812074/000155837016005950/oi-20151231x10ka.htm
What journal entry would OI have made to record the
additional $295 million of asbestos liability?
Briefly summarize the effect of the restatement on the
following financial statements.
The income statement.
The balance sheet.
The statement of cash flows.
The statement of share owners’ equity.
What accounts were affected? By how much? What other
disclosures were impacted? Note 1 in the restated 2015 10-K describes the
changes.
Explain why OI’s treatment resulted in an increase to the
earnings for 2015, 2014, and 2013.
Based on OI’s disclosures in the 10-K prior to restatement,
was it clear that the firm was using a three-year period to estimate asbestos
litigation? Be sure to explain your response.
The discussion between the SEC and OI was extensive and
interesting. Appendix A shows all of the correspondence between the two and
includes web links to the letters. The following questions are based on those
letters and the information in the case.
Briefly summarize OI’s justification of its treatment of the
unasserted asbestos liability. What are the pros and cons of OI’s original
treatment of the asbestos liability?
Briefly summarize the SEC’s position regarding the treatment
of the unasserted asbestos liability. What are the pros and cons of the SEC’s
approach?
Which approach do you find preferable and why? You can
choose either OI or the SEC, but your analysis needs to be based on something
other than the fact that the SEC prevailed or OI did not.
How is OI’s experience with asbestos litigation similar to
Garlock’s? How is it different?
Approaching this issue as a member of OI’s executive
management group, describe how your approach to asbestos litigation would be
similar to or different from OI’s.
You must submit an Excel file as a separate file
supporting your submission.