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Case
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Reference no. 9-196-091
Published by: Harvard Business Publishing
Originally published in: 1995
Version: 4 June 2002

Abstract

Focuses on the revenue recognition choices facing Intel, Inc. following Intel's decision to replace the flawed Pentium chips. Traces the events leading up to IBM's decision to halt shipment of computers that have Intel's microprocessor inside and Intel's decision to replace all the flawed chips. The choices facing Intel are: make a provision for the costs of replacing the chips, defer recognition of revenue on the flawed chips that it has now agreed to replace, or make no entries on grounds of materiality.; Used to teach the principles underlying revenue recognition. Examines the relationship between bonus contracts and the accounting method choices and illustrates the role of managerial judgment in accounting choices.
Size:
$12 billion revenues
Other setting(s):
1994

About

Abstract

Focuses on the revenue recognition choices facing Intel, Inc. following Intel's decision to replace the flawed Pentium chips. Traces the events leading up to IBM's decision to halt shipment of computers that have Intel's microprocessor inside and Intel's decision to replace all the flawed chips. The choices facing Intel are: make a provision for the costs of replacing the chips, defer recognition of revenue on the flawed chips that it has now agreed to replace, or make no entries on grounds of materiality.; Used to teach the principles underlying revenue recognition. Examines the relationship between bonus contracts and the accounting method choices and illustrates the role of managerial judgment in accounting choices.

Settings

Size:
$12 billion revenues
Other setting(s):
1994

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