Violation of the General Accounting Principles

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Violation of the General Accounting Principles
Generally Accepted Accounting Principles (GAAP) are standards that outline the legalities of business and corporate accounting. Companies releasing financial statements to the public and stock exchanges are required to follow the GAAP guidelines.
Monsanto Company, an agribusiness firm, was forced to part with a penalty of $80 million and was assigned an independent compliance consultant for violating accounting rules. Monsanto recorded increased revenue by improperly accounting for rebate payments to customers of their product named Roundup. The payments were disguised as selling, general and administrative expenses instead of rebates, which boosted their gross profit. Monsanto lacked proper internal accounting controls to correctly file for rebate payments (U.S Securities and Exchange Commission, 2016), leading to a misstatement about its earnings. Due to false accounting, the company met consensus earnings per share.
Investors were right to hold the company liable for the improper accounting. It violated the Securities Act of 1933, which states that investors are required to receive financial and other significant information concerning securities being offered for public sale and prohibi...