Stamford International Case Study

Stamford International Q1 EPS According to GAAP

In accordance with basic application of US GAAP, Exhibit 2 shows an expected Q1 EPS figure of 52 cents per share. This is slightly higher than the 47 cents per share figure established by Bill Lawrence, Stamford International CFO, as the baseline before adjustments. The 5 cents per share difference can be accounted for between adding in 2 and 3 cents for deferred maintenance and the Sioux Springs relocation, respectively. These expenses were incurred during the prior accounting period, but were improperly left to be recognized during the 1st quarter of this year. Rather than subtracting this 5 cents per share from the Q1 EPS figure, the appropriate amount (undisclosed) should be applied directly to the retained earnings account as a prior-period adjustment. Accordingly, a note to the financial statements explaining the change and correcting the prior year’s income statement (and EPS calculation) will be required. It would be a mistake to delay recognition of these expenses even further into the future, as the CEO would rather perform.

Other posts on the Stamford International case study:
Stamford International Case Study
Stamford International Case Study, Co/CEO
Stamford International Case Study, Technology
Stamford International Case Study, Sarbanes-Oxley