Simulation Question 4 This simulation question is based upon a true set of facts. The information contained in the simulation question was obtained from publicly available sources. How Did Sunbeam Corporation Improperly Recognize Its Revenue? products. From the last quarter of 1996 until June 1998, Sunbeam Corporation's senior management created the illusion restructuring of Sunbeam in order to inflate its stock price and thus improve its value as an acquisition target. To th a Delaware corporation headquartered in Boca Raton. Forida, that manufactures houschold appliances and outdoor is end, management employed 4 Financial Statement Fraud financial condiation. Among these of a "big bath restructuring, which litigation reserve against (a)A1yearent 19%, surkean Corporation improperly created S35 million i"ookiejar-menes as were reversod into income the following year in 1997. For example, Sunbeam Corporation ereated a $12 sumerous inpeoper accounting methods to lalsily the Corporation's results and conceal its deteriorating accounning methods established in conformity with Generally Atrast is from a over substance" revenue connngn sale of burbecue grills lo a wholesaler. The wholosaker held Sunbeam merchandise over a quarter end, waitl hr risks of ownenhip. Moreover, the agroemot peovided that the wholesaler c Sunhcam would pay all costs of shipmenr and sarage rring so espenses in this transaction, the Sunbean Corporation during the thind quarter of 1997 (c) Beginning with the first quarter of 1997, Sunbeam Corporation discounts and other incemtives to place their parchase onders before the period when they would accelerating expected sales theough "channel stufting" from later periods into the prescnt period provided a Company's profit margins and impoverishod sales in lader periods, known as a "doom loop" approach to carninsering its customers financial (d) In the sacond quarter of 1997, Sunbeam corporation began using "bill and hold sales" to improve carnings y incentives to write panchase onders before they needed the products. Thus, Sunbeam Corporation sold products in normally have sold in later periods. Typically, Sunbeam Corperation offiered to hold products for its customers deh liability by at least S6 million. for an environmental remediation. However, this reserve amount was not id not sell the merchandise, and tha in fact retuned all of the grills to liability b) At the end of March 1997, just before the quarter cosod, Sunbeam Corpoeation booked 1.5 million of could return all of the merchandise if it d began a patern of accekerating its espected sales by offering its customers misleading impression of the have done so. This practice of the second quarter that it would until delivery was requested and o pay tdhe coasts of sornp, shipmet, and insurance on the prodacts Morsover, the customers ofien retained the right, through explicit agreement or established practice, to retum unsold products to Sunbeam Corporation Reguired 1. For part (a) ahove i) Explain clearly what the ter" " okie-jar reserve meant Refer to accounting textbooks or search the Internet or the meaning. u)Explain cleurly what the lerm a Tbig buh" restracturing meant. Refer to accounting textbooks or search the Intenet for the meaning. (ili) Explain clearly why the "cookie-jar" reserves and the "big bath restructuring are not in conformity with Generally Accepted Accounting unting Standards No5 (FAS 5) and the SEC's Staff Accounting Bulletin No.101 SAB 101) 2. For part (b) above 0) Explain clearly y what the term "form ower substance" in revenue rocognition meant. Refer to accounming textbooks or search the Internet for the ) Explain clearly why the "form over substance" in revenue recognition on a contingent sale is not in conformity with Generally Accepted Accounting Principles (GAAP) Refer to the Statcment of Financial Accounting Standards No.5 (FAS 5) and the SEC's Staff Accounting Bulletin No 101 (SAB IO1) 3. For part (c) above 0) Explain clearly what the terma"'channel stuffing" in sales meant. Refer to accounting textbooks or search the Internet for the meanin i) Esxglain cleary what the term a "doom loop" approoch in caming management meant. Refer to accng texbooksor g. approach in g textbooks or search the Internet for the meaning ii) Explain clearly why undisclosed or inadequate disclosed "channel stuffing" in sales and the "doom loop" approach do not met the qaarterly iling requirement of the SEC, Refer to the SEC's Regulation S-K, items 101 and 303 for .For part (d) above 0) Explain clearly what the term "bill and hold" sales mea (0) Explain clearly what criteria should be used to recognize revenue on Gencrally Accepted Accounting Principles (GAAP) Refer to bap:www.assa.comchaptes this website were moved, search other available websites. (ima) Explain clearly what criteria should be used to recognize revenue on Sumbeam Corporation's bill and hold" sales in earning management nt. Refer to accounting textbooks or search the Intemet for the meaning conformity with the disclosure roquirement of the SEC, Refer to the SEC's Matter of Siewart Parnessxh Accounting and Auditing Enforcement Rel.(AAER) No. 108 (August 5, 1986) and Staff Accounting Bulletin No.101 (SAB unbeam Corporation's "bill and hold" sales in conformity with for information; if under the Parness criteria ge Act Rel. No. 23507. Note: In part 4i), if you find the given URL link does not work., Google for the term bill and hokd from any other wehit reference their URIs) in your answer You must answer all parts 1 through to 4, and mast not exceod 3 pages of typing using single-space and medium-font letters. Simulation Question 4-3 This simulation question is hased upon a true set of facts. The information containgd in the available sources. Simulation Question 4 This simulation question is based upon a true set of facts. The information contained in the simulation question was obtained from publicly available sources. How Did Sunbeam Corporation Improperly Recognize Its Revenue? products. From the last quarter of 1996 until June 1998, Sunbeam Corporation's senior management created the illusion restructuring of Sunbeam in order to inflate its stock price and thus improve its value as an acquisition target. To th a Delaware corporation headquartered in Boca Raton. Forida, that manufactures houschold appliances and outdoor is end, management employed 4 Financial Statement Fraud financial condiation. Among these of a "big bath restructuring, which litigation reserve against (a)A1yearent 19%, surkean Corporation improperly created S35 million i"ookiejar-menes as were reversod into income the following year in 1997. For example, Sunbeam Corporation ereated a $12 sumerous inpeoper accounting methods to lalsily the Corporation's results and conceal its deteriorating accounning methods established in conformity with Generally Atrast is from a over substance" revenue connngn sale of burbecue grills lo a wholesaler. The wholosaker held Sunbeam merchandise over a quarter end, waitl hr risks of ownenhip. Moreover, the agroemot peovided that the wholesaler c Sunhcam would pay all costs of shipmenr and sarage rring so espenses in this transaction, the Sunbean Corporation during the thind quarter of 1997 (c) Beginning with the first quarter of 1997, Sunbeam Corporation discounts and other incemtives to place their parchase onders before the period when they would accelerating expected sales theough "channel stufting" from later periods into the prescnt period provided a Company's profit margins and impoverishod sales in lader periods, known as a "doom loop" approach to carninsering its customers financial (d) In the sacond quarter of 1997, Sunbeam corporation began using "bill and hold sales" to improve carnings y incentives to write panchase onders before they needed the products. Thus, Sunbeam Corporation sold products in normally have sold in later periods. Typically, Sunbeam Corperation offiered to hold products for its customers deh liability by at least S6 million. for an environmental remediation. However, this reserve amount was not id not sell the merchandise, and tha in fact retuned all of the grills to liability b) At the end of March 1997, just before the quarter cosod, Sunbeam Corpoeation booked 1.5 million of could return all of the merchandise if it d began a patern of accekerating its espected sales by offering its customers misleading impression of the have done so. This practice of the second quarter that it would until delivery was requested and o pay tdhe coasts of sornp, shipmet, and insurance on the prodacts Morsover, the customers ofien retained the right, through explicit agreement or established practice, to retum unsold products to Sunbeam Corporation Reguired 1. For part (a) ahove i) Explain clearly what the ter" " okie-jar reserve meant Refer to accounting textbooks or search the Internet or the meaning. u)Explain cleurly what the lerm a Tbig buh" restracturing meant. Refer to accounting textbooks or search the Intenet for the meaning. (ili) Explain clearly why the "cookie-jar" reserves and the "big bath restructuring are not in conformity with Generally Accepted Accounting unting Standards No5 (FAS 5) and the SEC's Staff Accounting Bulletin No.101 SAB 101) 2. For part (b) above 0) Explain clearly y what the term "form ower substance" in revenue rocognition meant. Refer to accounming textbooks or search the Internet for the ) Explain clearly why the "form over substance" in revenue recognition on a contingent sale is not in conformity with Generally Accepted Accounting Principles (GAAP) Refer to the Statcment of Financial Accounting Standards No.5 (FAS 5) and the SEC's Staff Accounting Bulletin No 101 (SAB IO1) 3. For part (c) above 0) Explain clearly what the terma"'channel stuffing" in sales meant. Refer to accounting textbooks or search the Internet for the meanin i) Esxglain cleary what the term a "doom loop" approoch in caming management meant. Refer to accng texbooksor g. approach in g textbooks or search the Internet for the meaning ii) Explain clearly why undisclosed or inadequate disclosed "channel stuffing" in sales and the "doom loop" approach do not met the qaarterly iling requirement of the SEC, Refer to the SEC's Regulation S-K, items 101 and 303 for .For part (d) above 0) Explain clearly what the term "bill and hold" sales mea (0) Explain clearly what criteria should be used to recognize revenue on Gencrally Accepted Accounting Principles (GAAP) Refer to bap:www.assa.comchaptes this website were moved, search other available websites. (ima) Explain clearly what criteria should be used to recognize revenue on Sumbeam Corporation's bill and hold" sales in earning management nt. Refer to accounting textbooks or search the Intemet for the meaning conformity with the disclosure roquirement of the SEC, Refer to the SEC's Matter of Siewart Parnessxh Accounting and Auditing Enforcement Rel.(AAER) No. 108 (August 5, 1986) and Staff Accounting Bulletin No.101 (SAB unbeam Corporation's "bill and hold" sales in conformity with for information; if under the Parness criteria ge Act Rel. No. 23507. Note: In part 4i), if you find the given URL link does not work., Google for the term bill and hokd from any other wehit reference their URIs) in your answer You must answer all parts 1 through to 4, and mast not exceod 3 pages of typing using single-space and medium-font letters. Simulation Question 4-3 This simulation question is hased upon a true set of facts. The information containgd in the available sources