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Pages:
3 pages/≈825 words
Sources:
4 Sources
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Research Paper
Language:
English (U.S.)
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Topic:

Take Two Accounting Case

Research Paper Instructions:

SUMMARY
In August 2005, an article appeared in Fortune Magazine which suggested that Take Two Interactive Software had been somewhat aggressive in their practices for reporting earnings. Your job is to analyze and express an opinion on various accounting related matters suggested in the article and related documents.
Please address each of the following questions:
1. Refer to the Take-Two’s description of their Revenue Recognition policies in their “Notes to the Financial Statements”, as well as the related “Schedule II” in which Take-Two reconciles that “Allowance Account”.
Based on this information, as well as any other information that you deem relevant, do you believe that Take-Two’s Revenue Recognition policies were in compliance with US GAAP? Why or why not?
2. Assuming that the “Facts” provided in the SEC Complaint against Take Two Interactive are true, do you believe that Take Two’s Press Release dated February 12, 2004 adequately conveys the nature and magnitude of the accounting restatement? Why or why not?
Compare the SEC’s announcement of their settlement with Take Two (found at: http://www(dot)sec(dot)gov/litigation/litreleases/lr19260.htm) with Take Two’s June 9, 2005 Press Release describing the same settlement (included on the following pages). Based on these two distinct announcements of the same event, how much faith do you have in future Press Releases of Take Two Interactive?
3. Given the concerns expressed in the Fortune Article, are you inclined to believe that the “Net Accounts Receivable” of Take Two Interactive were overstated as of October 31, 2004? Are you inclined to believe that the “Inventory” reported by Take Two Interactive on October 31, 2004 was overstated?
Refer to the applicable financial statements and related notes of a “peer company”, Electronic Arts, whose annual reports may be found at:
http://investor(dot)ea(dot)com/ or www(dot)sec(dot)gov
With respect to (early-to-mid 2000’s) accounting policies regarding revenue recognition and related issues, how does Electronic Arts compare to Take 2? Do the accounting policies for Electronic Arts support or refute your initial conclusions?
4. What is the difference between “Sell In” and “Sell Through”? For the applicable portion of Take Two’s (current) revenue, which of the,approaches does Take Two seem to follow in the preparation of their,Income Statements? Or is it not possible to make this assessment?
5. Since the mid-2000’s, have Take-Two’s Revenue Recognition policies become more “conservative”? Support your conclusion.
6. Has the new revenue recognition guidance – ASU 2014-09 – had a material impact on the revenue reported by Take-Two? If so, in what way? If not, why not?
While there are no formal limits on the scope of your analysis, I would expect that most of you will be able to complete the assignment with a submission of no more than three or four pages. If you find yourself  exceeding this length, you may be overdoing it.
You are allowed (but not obliged) to work in groups of up to five members. Each member of the group will receive the same score, and no adjustments will be made for the size of the group.

Research Paper Sample Content Preview:

Take-Two Accounting Case
Student’s Name
Institutional Affiliation
Take-Two Accounting Case
Question 1 Solution
After reading and analyzing the provided text, I believe that Take-Two’s revenue recognition policies violated the compliance guidelines provided by US GAAP. Primarily, GAAP revenue refers to income statement revenue reported in an organization’s financial statement. The general concept of revenue recognition as an accounting principle is that payment must be recognized as earned. Accounting experts assert that revenue recognition can only occur after a critical event, such as the delivery of a product to a customer. In this case, Take Two’s revenue recognition policies violated GAAP’s standards because they inflated their revenue reports during fiscal years 2000 and 2001. Research illustrates that their actions allowed Take-Two to continuously meet or exceed analysts’ predictions regarding its earnings per share during the four quarters of the fiscal year 2000 and 2001 (Take-Two Interactive Software, Inc., 2005). The aim of manipulating their revenue reports was to meet specific financial targets, making the company appear profitable in the eyes of the public. The management’s actions led to the payment of substantial bonuses to Brant, David, and Muller. Therefore, it is true that Take-Two’s revenue recognition policies violated US GAAP standards.
Question 2 Solution
Having evaluated the read of the claims and findings, I do not believe Take-Two’s Press release dated February 12, 2004, because it does not convey the nature and magnitude of the accounting restatement. My reason for disagreeing with the restatement is that the company did not intend to be truthful to the public in the first place but only did that after a civil suit was filed against them. Therefore, it is inevitable that the restatement is not in good faith and only intends to cover up the company’s wrongdoings by trying to act ethically. Besides, Take-Two’s accounting restatement demonstrates the company’s inconsistencies in providing accurate information regarding its revenue, which one cannot ignore when intending to purchase any stocks from them (Take-Two Interactive Software, Inc., 2005). Based on the two distinct announcements of the same event, one cannot trust any future press release statements by Take-Two Interactive. The two different restatements demonstrate the company’s uncertainty in providing accurate information regarding its revenue recognition from the beginning.
Question 3 Solution
Based on the concerns expressed in the provided Fortune Article, I resonate Take-Two Interactive’s ‘Net Accounts Receivable’ contained overstatements as of October 31, 2004. I feel inclined to believe that it was overstated because the company’s management wanted to demonstrate that the organization was healthy to ensure that many people purchased their stocks. Besides, the U.S. Securities and Exchange Commission findings illustrate that the company’s actions violated the accounting principles and standards, demonstrating that their inventory and net accounts receivable were overstated. Take-Tw...
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