From 1999 to 2001, Tyco's revenue grew approximately 24% and it acquired over 700 companies. It was

Question:

From 1999 to 2001, Tyco's revenue grew approximately 24% and it acquired over 700 companies. It was widely rumored that Tyco executives aggressively managed the performance of the companies that they acquired by suggesting that before the acquisition, they should accelerate the payment of liabilities, delay recording the collections of revenue, and increase the estimated amounts in reserve accounts.
1. What effect does each of the three items have on the reported net income of the acquired company before the acquisition and on the reported net income of the combined company in the first year of the acquisition and future years?
2. What effect does each of the three items have on the cash from operations of the acquired company before the acquisition and on the cash from operations of the combined company in the first year of the acquisition and future years?
3. If you are the manager of the acquired company, how do you respond to these suggestions?
4. Assume that all three items can be managed within the rules provided by but would be regarded by many as pushing the limits of .
Is there an ethical issue? Describe your position as:
(A) An accountant for the target company and
(B) As an accountant for Tyco.

GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...