Intel Pentium Chip Controversy (A)

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Case

Reference no. 9-196-091

Subject category: Finance, Accounting and Control

Authors: VG Narayanan (Harvard Business School); James Evans (Harvard Business School)

Published by: Harvard Business Publishing

Originally published in: 1995

Version: 4 June 2002

Length: 10 pages

Data source: Published sources

Topics: Accounting procedures and policies; Strategic analysis; Customer relationship management; Decision making; Information management; IT management; Management; Profitability; Financial statements; Variance analysis

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Abstract

Following Intel Inc's decision to replace flawed Pentium chips, the company faces revenue recognition choices. 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 are outlined. Intel must decide whether to: 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.

Industries:

Business consulting services; Electronics manufacturing

Size:

USD12 billion revenues

Other setting(s):

1994