The Cendant Corporation

5254 Words Feb 16th, 2013 22 Pages
THE CENDANT CORPORATION ACCOUNTING SCANDAL BCOM21

TABLE OF CONTENTS

ACKNOWLEDGEMENT ………………………………………………………… 2 INTRODUCTION …………………………………………………………………. 3 SUMMARY ……………………………………………………………………….. 4-7 COMPANY PROFILE …………………………………………………………… 8 THE OFFICERS INVOLVE …………………………………………………….. 9-15 DISCUSSION ……………………………………………………………………. 16-20 THE SETTLEMENT The settlement with Cendant ………………………………………… 21-22 The settlement with Ernst & Young ……………………………….. 23 THE BREAKUP ………………………………………………………………… 24 CONCLUSION ………………………………………………………………….. 25 RECOMMENDATION ………………………………………………………….. 26 BIBLIOGRAPHY ……………………………………………………………….. 27 APPENDIX ……………………………………………………………………… 28-30

1

THE CENDANT CORPORATION ACCOUNTING SCANDAL BCOM21

ACKNOWLEDGEMENT

The
…show more content…
To conceal this, they then booked revenue that should have been taken later and utilized financial reserves that were set up to cover cancellations for CUC’s membership clubs in discount travel, shopping, and dining. At the end of 1996, the company also began dipping into reserves intended to cover acquisition charges in order to boost revenue. Credit card rejections were sometimes recorded late, inappropriate depreciation of certain assets, delayed recognition of insurance claims and accounting that didn’t meet generally accepted accounting principles (GAAP). On April 15, 1998, Cendant released a shocking message after the markets had closed for the day. Company officials had discovered potential accounting irregularities in its core membership-club operations that will require it to reduce reported 1997 operating income by $10 million or more and that it will hurt this year’s earnings. The primary issue at hand was the method employed by the CUC unit in recognizing revenue in its club-membership sales. It was discovered that too much of the revenue was booked up front, while the recording of the expenses associated with the memberships was deferred until future periods. The following day, Cendant’s stock price plunged from $36.00 to $19.06 as an astounding 108 million shares traded hands. The average trading volume for the Cendant had
Open Document