A financial analyst has been asked to review the financial statements of Koffman Corporation because a large client was considering a substantial purchase of Koffman stock. During his analysis, he found that Koffman's management had much discretion in its accounting practices. He needed to figure out its motivation so he could make a recommendation to his client. The impact of accounting policies and management decisions on accounting is examined in this case. Specifically, it highlights common questionable accounting practices in research and development write-offs in acquisitions, restructuring reserves, leases, contingent liabilities and portfolio investments. Students will have to look carefully behind the numbers to draw conclusions and make numerical adjustments.
