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    Discussion-Biovail Corporation

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    Owl
    1. A truck carrying products worth $10-20 million was involved in an accident, raising questions around how the revenue from the products should be recognized and how much the insurance payout would be. 2. Two banks cut their stock ratings for the company due to perceived issues with poor supply chain management, though evidence for production delays was not clear. 3. The company's stock value declined substantially after one analyst reported poor revenue and earnings despite rapid sales growth being reported. Attempts were made to discredit the analyst, leading to an SEC investigation and lawsuit.

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    Discussion-Biovail Corporation

    Uploaded by

    Owl
    50 views1 page
    1. A truck carrying products worth $10-20 million was involved in an accident, raising questions around how the revenue from the products should be recognized and how much the insurance payout would be. 2. Two banks cut their stock ratings for the company due to perceived issues with poor supply chain management, though evidence for production delays was not clear. 3. The company's stock value declined substantially after one analyst reported poor revenue and earnings despite rapid sales growth being reported. Attempts were made to discredit the analyst, leading to an SEC investigation and lawsuit.

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    Case Study Summary

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    1. A truck carrying products worth $10-20 million was involved in an accident, raising questions around how the revenue from the products should be recognized and how much the insurance payout would be. 2. Two banks cut their stock ratings for the company due to perceived issues with poor supply chain management, though evidence for production delays was not clear. 3. The company's stock value declined substantially after one analyst reported poor revenue and earnings despite rapid sales growth being reported. Attempts were made to discredit the analyst, leading to an SEC investigation and lawsuit.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    50 views1 page

    Discussion-Biovail Corporation

    Uploaded by

    Owl
    1. A truck carrying products worth $10-20 million was involved in an accident, raising questions around how the revenue from the products should be recognized and how much the insurance payout would be. 2. Two banks cut their stock ratings for the company due to perceived issues with poor supply chain management, though evidence for production delays was not clear. 3. The company's stock value declined substantially after one analyst reported poor revenue and earnings despite rapid sales growth being reported. Attempts were made to discredit the analyst, leading to an SEC investigation and lawsuit.

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    © All Rights Reserved
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    of 1

    1.

    Truck Accident
    Manager/Key Person: Brian Crombie (CFO), Vice President of Finance (Kenneth Howling)
    Problem: Improper revenue recognition
    Theory: Conservatism
    Points:
    -

    FOB shipping point vs. FOB destination


    Net of reserves?
    Valuation of the products on truck (range from $10 million to $20million)
    Saleable in the future (after inspection)
    Products are fully insured (how much will insurance company pay back?)

    2. Stock Rating Cutting


    Manager/Key Person: Canadian Imperial Bank of Commerce, J. P. Morgan Securities Inc.
    Problem: Poor supply chain management
    Theory: Transparency
    Points:
    -

    Production delays & operational uncertainties (evidence of these did not mentioned in
    the txt of case study)

    3. Stock Value Declines Substantially


    Manager/Key Person: Jerry Treppel (Mariss predecessor at Banc of America Securities),
    Biovails Executives, SEC
    Problem: Unclear information
    Theory: Intimidation, Fairness, Transparency
    Points:
    -

    Poor revenue and earnings performance, but rapid sales growth was reported
    Biovails Executives failed to persuade Jerry to retract his report, and then defame Jerry
    which lead to investigation by SEC, Jerry sue Biovail

    4. Following the spirit of U.S. GAAP or just box ticking?


    Manager/Key Person: Maris (Jerrys successor at Banc of America Securities)
    Problem: Following the accounting standards strategically
    Theory: Full disclosure
    Points:
    -

    Channel stuffing or really following seasonal customer buying patterns?


    o

    Channel stuffing is a business practice in which a company, or a sales force within a


    company, inflates its sales figures by forcing more products through a distribution
    channel than the channel is capable of selling. (SS > DD)

    The products on the truck on the truck should be third quarter item or fourth quarter
    item?

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