Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements In 1984 they changed the depreciation method from accelerated methods to the straight-line for financial reporting purposes. This change included a adjustment of the residual values on certain machinery and equipment. They also included the products purchased from Kobe Steel, LTD and sold by them in their net sales. Moreover, they also included the financial statements of some foreign subsidiaries. 2.
What is the effect of the depreciation accounting method change on the reported income in 1984? How will this change affect profits in future years? It increased the net income to 11 million for 1984. The straight-line method will allow the assets to continue to depreciate in the same amount for the life of the asset. This change will decrease profit in future years, because with the accelerated method, in the future years the depreciation expense would have been lower 3. What is the effect of the depreciation lives change? How will this change affect future reported profits?
The Essay on The Ten Most Important Changes Over The Next Ten Years
The ten most important changes over the next ten years Within Third World countries, multinationals have direct linkages through the products they produce, many flowing to consumers who cannot read; through their workers who are often drawn from urban slums or rural poverty; through the purchase of materials, components, and services from local suppliers. Although multinationals contribute to the ...
The depreciation live increase decreases the annual depreciation expense, which increase in future profits reported. 4. The depreciation accounting changes assume that Harnischfeger’s plant and machinery will last longer and will lose their value more slowly. Given the business conditions Harnischfeger was facing in its primary industries in 1984, are these economic assumptions justified? I think they were, because if they were experiencing a diminishment in sales this would also mean that they were giving less use to their machinery, and that would cause less wear and tear to the machinery justifying and increase n the useful life of the asset.
Harnischfeger describes the effect of LIFO inventory liquidation on its reported profits in 1984. Describe what is meant by LIFO liquidation and how liquidation affects a company’s income statement and balance sheet. The LIFO inventory’s method allowed the company’s inventory cost to liquidate their older LIFO inventory. A LIFO liquidation would occur if current sales are higher than current purchases, as a result, any inventory not sold in previous periods must be liquidated. In the case of Harnischfeger, it benefited the income statement by 2. million in 1984. Meaning that the net loss of previous year 1983 was reduced by approximately 15. 6 million. The balance sheet would have decrease of inventory, due to liquidation. 6. Note 8, states Harnischfeger’s allowance for doubtful accounts.
In 1984 the corporation established a new plan, which goal was an improvement in the minimum pension benefit. This constituted in a restructure of the Salaried Employees’ Retirement Plan. This decision could help the company to rebuild the trust of customers and suppliers for continuing in business. The workers would suffer a significant economic lost and could lose the motivation to work for the company. But there is a possibility that a positive view could emerge because they could appreciate the company’s efforts to keep them working there, and then cooperate to take the company to the next level. . How did the pension plan changes affect Harnischfeger’s financial statements in 1984?
Are these changes likely to affect future profits? The effect of the changes in the investment return assumption rates for all U. S. plans, together with the 1984 restructuring of the U. S. Salaried Employees’ Plan, was to reduce pension expense by approximately $4. 0 million in 1984 and $2. 0 million in 1983, and the actuarial present value of accumulated plan benefits by approximately $60. 0 million in 1984. This may have an effect on future profits.
The Business plan on Harnischfeger Corporation
... 1984 as stated in Note 2 of its financial statements. Harnischfeger made two accounting changes from which one made its net sales increase, and ... considerations because Harnischfeger must show profits this year to show that its restructuring plan has given favorable results and returned the company back ...
The pension plan changes affected positively the statements in 1984. Less assets were available for benefits; therefore, more income was reflected in the financial statements, which contributed to the cash to pay debt obligations. Furthermore, if reducing the debt, company could recover the banks and shareholder’s trust. 10. Summarize all the accounting changes Harnischfeger made in 1984, and their effects on pre-tax profits and cash flows in 1984.
Also, revenue recognition, inventory, depreciation, allowances for reserves, pension forecast and depreciation. 11. Accounting statements are used by investors, lenders, customers, employees, and governments in dealing with Harnischfeger. Among these groups, who is most likely to “see through” the above accounting changes, and who is least likely to do so? The least likely to “see through” the accounting changes are those individuals who do not have an understanding of accounting concepts because some methods of reporting can inflate or deflate the numbers without a tangible or sustainable change.
Generally I would say that investors, lenders, and governments should be the ones to most likely “see through” the changes – but, bad business decisions have been made based off of financial statements and the image that they portray. Certain employees in the company, such as those in accounting, finance, and upper management, should be able to “see through” the changes. One of the interesting things with accounting is that, it can be “generally accepted” to make adjustments that can inflate or deflate income without a real tangible or sustainable adjustment within the corporation. 12.
Are the accounting changes likely to help or to hinder Harnischfeger’s ability to implement its business plan? Be as specific as possible. The changes made strongly justify the inflows and outflows of the company in the periods analyzed. From my point of view, Harnischfeger reflects a positive result on management through its financial reports. Therefore, shareholders and business related entities such as banks and suppliers could positively support the needs of the company because it is showing the ability to overcome financial problems through management based on the financial statements.
The Essay on Introduction, review of accounting process and financial statement
Part 1 General acceptable accounting principle General accounting principles are set of rules generated by accounting board to guide accountant in preparation and reporting of financial statements. General acceptable accounting principles are accounting guidelines (GAAP) used in United States and are issued by financial accounting standard board (FASB). Other countries uses the guideline issued by ...
However, the accounting practice can be a matter of numbers’ convenience and it can be altered just to show easy actions. Therefore, even thought the changes indicate an optimistic move, it does not guarantee that the company is going to be able to implement its business plan. 13. Overall, what is your assessment of Harnischfeger’s future as of 1984? This is a mere case of numbers’ convenience. They wanted to make their financial statements look pretty so that investors would buy there stocks and suppliers would continue giving credit for being able to produce product and sell.
Realistically, if analyzing the three years from 1982 to 1984; it is challenging to get to the successful point where Harnischfeger is, according to the financial statements. The future of the company depends on the management realistic actions that could erode after more investors buy stocks and the company lowers its financial obligations. If company continues playing with accounting figures and hiding the losses, the future would be catastrophic and the company would not survive in the long run.
