In 1991 IBM, GM, and GE all experienced very poor yearsslow sales, costly reorganiza tions, and low
Question:
In 1991 IBM, GM, and GE all experienced very poor years—slow sales, costly reorganiza¬ tions, and low profits. During that year each company decided to adopt an accounting standard that required the companies to recognize a huge expense (associated with employee retirement health care benefits) that historically had been deferred. Interestingly, the companies were not required by the FASB to adopt the standard until 1993. REQUIRED:
a. Identify which financial reporting strategy the companies appear to have practiced, and provide several plausible reasons why they may have done so.
b. That same year a number of the major oil companies experienced particularly high profits due in large part to the events surrounding the war in the Persian Gulf and Operation Desert Storm. These companies chose to recognize expenses in 1991 that normally would not have been recognized until later years. Which reporting strategy did the oil compa¬ nies appear to practice, and what are several plausible reasons for why they may have done so?
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