The acquisition of Autonomy by Hewlett-Packard (HP) for the amount of $11.1bn was written down by $8.8bn in 2012 (Hurley and Hurley 2013). The products and services include the software licence, installation, training services, and post-contract customer support (Morningstar 2015). Once refreshed go through the case solution again - improve sentence structures and grammar, double check the numbers provided in your analysis and question your recommendations. It was the differences of software revenue recognition between US GAAP and IFRS that prompted HP to accuse Autonomy of booking licensing revenue upfront before deals were closed, inflating its revenue (Reuters 2012).
Each country will be identified in terms of whether it is principles-based (UK) or rules-based (US). Consequently, companies adopting GAAP would be wary when engaging in future merger and acquisition activities with companies under IFRS jurisdiction, which protects investors’ interests. 's Claims 'Completely and Utterly Wrong'. They are just awesome. This signifies that Americans are more inclined to maintaining their self-interest than the harmony of a group of individuals, with a higher possibility of manipulation in companies’ financial statements by individuals with authority (Hofstede 2015).
Using the given measurement models in the assignment briefing, this report analyzes HP’s and Autonomy’s financial statements in terms of revenue recognition and inventory valuation. Analyzed case details based on those fundamentals and. Diagram 2 below is an illustration of both countries’ culture through Hofstede’s cultural dimensions. Revenue recognition is only considered when there is an exchange transaction; this signifies that revenue should not be recognised until the exchange transaction has occurred (PWC 2012). Hewlett Packard on November 20, 2012 delivered a statement against Autonomy's unmentioned members of the previous management … Hence, other regulators such as The Public Company Accounting Oversight Board (PCAOB) that was created by the Sarbanes-Oxley Act of 2002 and the American Institute of Certified Public Accountants (AICPA) also play important roles in monitoring audit companies’ actions (IAS 2015). Academy of Business Journal, 3 (2), 1-23. Up until now, both entities have made slight progress and had many deliberations on joint projects such as the impairment and revenue recognition phases (Mostafa and Mohamed 2014). Reading up the HBR fundamentals helps in sketching out business case study analysis and solution roadmap even before you start reading the case study.
A major difference between the accounting standards is that US GAAP has more options for valuating the inventory such as First in First out (FIFO), Last in First out (LIFO), and the weighted-average method, whereas IFRS restricts LIFO (Fosbre, Fosbre and Kraft 2010). Therefore, Autonomy could be acquitted from HP’s allegation in the UK as IFRS encourages a flexible approach for companies to achieve true and fair representation in its financial statements (Kanagaretnam, Lim and Lobo 2014). Consequently, FIFO would mean that companies gain a larger profit margin, which would be perceived to be attractive by investors. BBC. SEC (2015) The role of the SEC. They make assumptions and professional judgements when selecting an accounting method to adopt (Cieslewicz 2014). Diagram 2: US and UK cultural comparisons (Hofstede 2015). Because the IFRS is recognised as a global accounting standard, the UK’s accounting practices are based on reasonable judgement whereby companies can select accounting methods for their financial statements (Dennis 2008). 2014).
Focus on the following -. . However, the convergence project between IASB and FASB should adopt a more stringent approach like US GAAP as a global accounting standard for revenue recognition policy (Dennis 2008). Morningstar (2015) Autonomy Annual Report 2010. Developed an ability to prioritize recommendations based on probability of their successful implementation. IAS (2015) Overview of the structure of the IFRS Foundation and IASB. Did HP not carry out proper due diligence and valuation before the offer? Mostafa, S. H. and Mohamed, T. A. Use these instances and opinions to mark out the organization's culture, its people priorities & inhibitions. Often readers scan through the business case study without having a clear map in mind. Time line can provide the clue for the next step in organization's journey. This acquisition attracted tremendous media attention, due to both its size and price. Moreover, the cultural understanding of masculinity in both countries prompts individuals to prioritise achievement and success and encourage competition. Marking out the protagonist and key players in the case study from the very start. . Initially, HP left Autonomy to operate as its own unit. Mike Lynch publishes an open letter to Hewlett-Packard. Auditing: A Journal of Practice and Theory 33 (3), 87-104. Case study solutions can also provide recommendation for the business manager or leader described in the business case study. Rivera, et al. So instead of providing recommendations for overall company you need to specify the marketing objectives of that particular brand. This case also highlighted the need for increased due diligence on HP’s side in terms of the expertise of accountants and auditors (Zapranis and Tsinaslanidis 2012).
Was this acquisition a strategic fit to HP? De La Merced, M. (2012). HBR case studies provide anecdotal instances from managers and employees in the organization to give a feel of real situation on the ground.
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