Harnischfeger Case

7) What was the effect on 1988 earnings per share, of the non-recurring items: area development

Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements.

1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements.

1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements.

4. The depreciation accounting changes assume that Harnischfeger’s plant and machinery will last longer and will lose their value more slowly.  Given the business conditions Harnischfeger was facing in its primary industries in 1984, are these economic assumptions justified?

1. Identify all the accounting policy changes and accounting estimates that Harnischfeger made during 1984. Estimate, as accurately as possible, the effect of these on the company's 1984 reported profits.

Cost – HD’s cost of goods sold has increased from 1991 to 1995 due to expansion of production. Similarly, the cost of selling, admin and engineering has also increased.

1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements. In the 1984 the corporation computed depreciation expense on plants, machinery and equipment by using the straight-line method for financial reporting purposes. These changes were made to provide a more equitable allocation of the cost of the plants.

Note 9 indicates that Harnischfeger decreased its R&D expense considerably in 1984 relative to the previous two years. Do you think this change was motivated by business considerations or accounting considerations? How did this change affect the company’s reported profits in 1984?

For years 1983-1985, additional corporate assessment expense was given. This would lower Polymold’s earnings on their income statement. Another piece of data that was given is research and development expense. Without the CAD/CAM investment, research and development expense is $130,000. This is double to $260,000 without the CAD/CAM investment. This would lower earnings. We are also given the savings that the investment would yield. Without the CAD/CAM investment, there would still be savings – but not as much as with the CAD/CAM investment, which is due to the depreciation of the equipment and tax credits.

For pensions and post-retirement accounting methods to recognize the benefit costs, estimates and assumptions on future events ascertaining the timing and amount of benefits payments must be sought first. This paper seeks to compare and contrast the early historical accounting for pensions and post-retirement healthcare and life insurance benefits with the rules and guidance applied today in addition to the changes to such guidance and rules that would improve the accounting and reporting of such benefits depending on the business and political changes and as such, predict the effect of such changes on financial reporting and accounting practices.

1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements.

For the first nine months in 1986, NASA rubber division generated a sale of $66 million which exceeded the budgeted sales by $4.7 million. At the same time, NASA created a positive gross margin of 40 million which exceeded the budgeted gross margin by $3.7 million. However, they experienced a net loss of .876 million, which was $2.8 million lower than the budgeted amount.

In February 2003, EITF reached a consensus on Issue of Accounting for the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities. Toyota has already begun the separation process. However, no effect of this transaction has been recognized in the consolidated financial statements for the year ended March 31, 2003 as the completion of the transfer of the benefit obligation and related plan assets to the Japanese government is expected in the year ending March 31, 2004.

It would also reduce the risk of price increases by negotiating future prices. As shown previously, Harnischfeger was able to successfully reduce its cost to sales ratio. Through targeting new growth, emphasizing the high technology portion of its business and developing the Industrial Technologies Group, would create new business and ultimately increase sales for the company, which is shown in its financials, a 24% increase in sales from 1983 to 1984.