Toomer's Energy Drinks: Fueling Earnings Management?

Posted: 15 Aug 2015 Last revised: 15 Jul 2018

See all articles by James H. Long

James H. Long

Auburn University - School of Accountancy

Lasse Mertins

Johns Hopkins University - Carey Business School

DeWayne L. Searcy

Auburn University

Brian Vansant

Auburn University - Raymond J. Harbert College of Business - School of Accountancy

Date Written: 2018

Abstract

Companies around the world commonly engage in earnings management. Some earnings management techniques comply with U.S. GAAP and do not violate financial reporting standards (e.g., real earnings management techniques such as postponing research and development expenditures), other techniques clearly cross the line (e.g., misclassifying repair and maintenance expenses as capital expenditures), and some fall into a gray area (e.g., adjusting the allowance for bad debt). This case exposes students to an ethical dilemma involving earnings management: towards the end of the fiscal year, the executive management team at Tiger Energy Drinks’ European division realize they will fall just short of a short-term financial performance target, and consider ways in which they can manage earnings to generate sufficient performance. The case exposes students to ways in which companies manage earnings, and encourages students to think critically about the extent to which these techniques are ethical by requiring them to apply the IMA’s Statement of Ethical Professional Practice and the AICPA’s Code of Professional Conduct to a realistic scenario.

Keywords: Earnings Management, Ethics, Teaching Case

Suggested Citation

Long, James H. and Mertins, Lasse and Searcy, DeWayne L. and Vansant, Brian, Toomer's Energy Drinks: Fueling Earnings Management? (2018). Long, J. H., L. Mertins, D. Searcy, and B. Vansant. 2018. Toomer’s Energy Drinks: Fueling Earnings Management? Issues in Accounting Education, Vol. 33 (1):29-43; TN:17-27. , AAA 2016 Management Accounting Section (MAS) Meeting Paper, Available at SSRN: https://ssrn.com/abstract=2644476

James H. Long

Auburn University - School of Accountancy ( email )

301 Lowder Hall
Auburn University, AL 36849
United States
(334) 844-6214 (Phone)

HOME PAGE: http://www.jameshlong.com

Lasse Mertins (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

DeWayne L. Searcy

Auburn University ( email )

415 West Magnolia Avenue
301 Lowder Business Building
Auburn, AL 36849
United States

Brian Vansant

Auburn University - Raymond J. Harbert College of Business - School of Accountancy ( email )

415 West Magnolia Avenue
301 Lowder Hall
Auburn, AL 36849
United States
(333) 844-6218 (Phone)

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