Diamond Food Case Essays

6584 Words27 Pages
ISSUES IN ACCOUNTING EDUCATION Vol. 30, No. 1 2015 pp. 47–69

American Accounting Association DOI: 10.2308/iace-50948

Diamond Foods, Inc.: Anatomy and Motivations of Earnings Manipulation
Mahendra R. Gujarathi
ABSTRACT: Diamond Foods is America’s largest walnut processor specializing in processing, marketing, and distributing nuts and snack products. This real-world case presents financial reporting issues around the commodities cost shifting strategy used by Diamond’s management to falsify earnings. By delaying the recognition of a portion of the cost of walnuts acquired into later accounting periods, Diamond Foods materially underreported the cost of sales and overstated earnings in fiscal 2010 and 2011. The primary learning goal
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The author thanks Professors Martha Howe, Donna McConville, Ari Yezegel, participants at the 2013 North American Case Research Association Annual Conference, the 2013 American Accounting Association Northeast Region Annual Meeting, and 2014 American Accounting Association Annual Meeting for their comments and suggestions on the earlier versions of the case. Comments and suggestions of the editor, associate editor, and two anonymous reviewers are also gratefully acknowledged. Supplemental material can be accessed by clicking the links in Appendix A.

Published Online: October 2014






iamond Foods, Inc. (hereafter, Diamond, or the Company), is America’s largest walnut processor specializing in processing, marketing, and distributing nuts and other snack products (Reuters 2012). Diamond’s products are distributed globally in stores where snacks and culinary nuts are sold. Its major processing and packaging plant is located in California, the state that accounts for virtually the entire walnut production in the U.S. The Company has approximately 1,700 employees and its stock trades on the NASDAQ market under the symbol DMND. History: From Walnut Processor to Innovative Packaged-Food Company1

Diamond began in 1912 as a member-owned agricultural cooperative association, specializing in processing, marketing, and distributing culinary, snack, in-shell, and ingredient nuts. After almost a century as a walnut
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