Correcting Sight and Accounting at Lca-Vision Inc

11 Pages Posted: 2 Aug 2018 Last revised: 10 Nov 2021

See all articles by Justin Hopkins

Justin Hopkins

University of Virginia - Darden School of Business


This case provides students with an opportunity to decide how to respond to an SEC inquiry and how to communicate adverse news. It does so in the context of accounting for separately priced extended warranties. LCA-Vision (LCA), a leading provider of LASIK vision-correction services, accounted for separately priced extended warranties incorrectly. Under US generally accepted accounting principles (GAAP), LCA was required to defer revenues associated with extended warranties. Instead, LCA recognized 93% of these revenues immediately, and deferred the 7% in accordance with the proportion of customers needing follow-up treatment. During the routine review process, the SEC posted a comment letter questioning this accounting treatment, which subsequently led to a restatement and shareholder litigation. Therefore, the case is an opportunity to examine how managers interact with regulatory bodies, communicate with investors, account for separately priced extended warranties, and correct erroneous filings via issuing a restatement. It is suitable for an audience of accounting students, or as an elective for general business students who have some exposure to accounting.



Rev. Nov. 30, 2018

Correcting Sight and Accounting at LCA-Vision Inc.

It is 10:35 p.m. on March 13, 2007, and an excited Jonathan Harper puts down the phone. He just spoke with his boss, Levi, and has been given his first assignment as a new consultant. His firm advises on matters of securities regulations. The client, LCA-Vision Inc. (LCA), has just run into problems with the Securities and Exchange Commission (SEC). Harper did not get all the details, but, apparently, LCA's description of its accounting led the SEC to believe that its accounting for separately priced warranties is not in compliance with US generally accepted accounting principles (GAAP). LCA wants to know whether it is in compliance, and, if not, how it should account for these warranties and communicate with the SEC and investors. Harper can hardly believe his luck. In his very first assignment, he will get an opportunity to advise a client on how to deal with the nation's top securities regulator. Levi had arranged a meeting with him in the morning to share details. But Harper was too excited to sleep, so he decided to see what he could find out about LCA and its accounting policies relating to extended warranties prior to the meeting.

Harper races online and finds that LCA is listed on NASDAQ (under the ticker LCAV), and is one of the leading providers of laser vision-correction services in the United States. He learns that LCA owns and operates 60 LasikPlus vision centers in the United States, and operates some in Canada through a joint venture. Since 1995, the company has performed more than 740,000 laser vision-correction procedures throughout the United States and Canada. Further, its stock price took off from 2003 through 2006, but is now starting to stall (Exhibit 1).

. . .

Keywords: restatement, SEC oversight, investor relations, accounting for separately priced extended warranties

Suggested Citation

Hopkins, Justin, Correcting Sight and Accounting at Lca-Vision Inc. Darden Case No. UVA-C-2413, Available at SSRN: or

Justin Hopkins (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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