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Many of your past big winners have involved accounting irregularities Is that still a fruitful area for you JC: No question This can run the gamut from simple overstatement of earnings, often a gray area, to outright fraud We re trying to nd cases where the economic reality is signi cantly divorced from the accounting presentation of the business It s not GE managing earnings everybody does that We want to see something way beyond that, where management is going out of its way to mislead It could be the hiding of losses in offshore subsidiaries like Enron It could be abusing mark-to-market accounting like Baldwin-United and many others It could be Boston Chicken, a big winner for us in the 1990s, lending money to franchisees to cover losses and not reserving for the receivables The biggest abuse in accounting today, often legally, is in acquisition accounting.

SELECT data FROM demo318 WHERE a=0 AND b=11;

Because there has been only one purchase thus far, we can easily calculate, as shown in column 7, that the total inventory valuation is $500, by multiplying the unit cost of $10 (in column 3) by the number of units left in stock (in column 5) So far, we have a per-unit valuation of $10 Next we proceed to the second row of the exhibit, where we have purchased another 1,000 units of BK0043 on June 4, 2003 This purchase was less expensive, because the purchasing volume was larger, so the per-unit cost for this purchase is only $958 Only 350 units are sent to production during the month, so we now have 700 units in stock, of which 650 are added from the most recent purchase.

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consumers could configure their new S60 online and request a price quote directly from a Volvo retailer Consumers who conduct online research are more informed and that is good for Volvo Nevertheless, Volvo retailers were skeptical Revolvolution necessitated a revolution in the mind-set of retailers with regard to the sales process Volvo had to convince them that it is good for consumers to start the buying process online There is a happy ending here Part of the original plan was that a world-first idea like this would garner significant press Which would mean that the launch of Revolvolution and the S60 itself would be featured in mass media at no additional cost Indeed, it was viewed as so innovative that it was covered in the Wall Street Journal and was picked up by more than 60 mass-media outlets in just the first week of the campaign That is significant exposure.

To determine the new weighted-average cost of the total inventory, we first determine the extended cost of this newest addition to the inventory As noted in column 7, we arrive at $6,227 by multiplying the value in column 3 by the value in column 6 We then add this amount to the existing total inventory valuation ($6,227 plus $500) to arrive at the new extended inventory cost of $6,727, as noted in column 8 Finally, we divide this new extended cost in column 8 by the total number of units now in stock, as shown in column 5, to arrive at our new per-unit cost of $961 The third row reveals an additional inventory purchase of 250 units on July 11, 2003, but more units are sent to production during that month than were bought, so the total number of units in inventory drops to 550 (column 5).

This is still wide open to management estimates for things like writing down assets, writing up liabilities and setting reserves Often the target company, right before a purchase, is instructed to withhold sales and front-end expenses Tyco was a master of that Suddenly, right after the acquisition, things would look wildly accretive, but it was very misleading When you get on that treadmill, you have to do bigger and bigger acquisitions to keep the game going Another general area in which there s a real propensity for abuse is any case where companies are making long-term assumptions about the value of assets and have the ability to book them immediately into pro ts We scrutinize that very carefully .

This inventory reduction requires no review of inventory layers, as was the case for the LIFO and FIFO calculations Instead, we simply charge off the 150-unit reduction at the average per-unit cost of $961 As a result, the ending inventory valuation drops to $5,286, with the same per-unit cost of $961 Thus, reductions in inventory quanti-.

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