Subject category:
Finance, Accounting and Control
Published by:
Stanford Business School
Version: February 2002
Length: 27 pages
Data source: Published sources
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https://casecent.re/p/103873
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Abstract
Since 1999, Procter & Gamble (P&G) had reported restructuring charges each quarter for Organization 2005, a five year comprehensive corporate restructuring program. In 1995, the Financial Accounting Standards Board's Emerging Issues Task Force (EITF) issued a consensus opinion (EITF-94-3) that defined when certain restructuring costs could be recognized as a liability and specified increased financial statement disclosures. Yet, like other areas of accounting, there was considerable discretion in when and how a company could charge restructuring costs to earnings. In December 2001, P&G was halfway through Organization 2005. Should P&G management forecast the remaining costs of the program with enough detail to recognize a liability in FY 2002 for the balance of Organization 2005 charges? Or should it continue to recognize the remaining costs of the program each quarter as the program progressed? How should management exercise its discretion, and how should it explain the charges to investors?
Location:
Industry:
Size:
106,000 employees, USD39.2 billion revenues
Other setting(s):
1998-2001
About
Abstract
Since 1999, Procter & Gamble (P&G) had reported restructuring charges each quarter for Organization 2005, a five year comprehensive corporate restructuring program. In 1995, the Financial Accounting Standards Board's Emerging Issues Task Force (EITF) issued a consensus opinion (EITF-94-3) that defined when certain restructuring costs could be recognized as a liability and specified increased financial statement disclosures. Yet, like other areas of accounting, there was considerable discretion in when and how a company could charge restructuring costs to earnings. In December 2001, P&G was halfway through Organization 2005. Should P&G management forecast the remaining costs of the program with enough detail to recognize a liability in FY 2002 for the balance of Organization 2005 charges? Or should it continue to recognize the remaining costs of the program each quarter as the program progressed? How should management exercise its discretion, and how should it explain the charges to investors?
Settings
Location:
Industry:
Size:
106,000 employees, USD39.2 billion revenues
Other setting(s):
1998-2001