A cautionary tale

Article Abstract:

The partners of the US accounting firm Laventhol & Horwath decided in Nov 1990 to file for Chapter 11 bankruptcy, effectively putting the partners and their 3,000 employees out of a job. The bankruptcy came as a result of proliferating liability judgments against the firm: the firm paid a $30 million settlement for its role in the collapse of Grabill Corp, and the firm was assessed $37.7 million in damages by a jury in 1990 for its accounting work for a group of limited partnerships. The 350-partner firm, which in the year to January 1990 had an income of 350 million pounds sterling, had grown rapidly in the 1970s and 1980s by acquiring no less than 70 firms. The expansion was fueled by the expansion of the small business sector. The collapse of the firm illustrates the danger of exposure to fast-growing business sectors and the need for quality and financial controls.

Analysis, Management, Cases, Accounting firms, Accounting services, Business failures, Laventhol and Horwath

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United we fall

Article Abstract:

Reunification has resulted in the financial weakening of Germany. The burden of rebuilding East Germany has fallen into the hands of West Germans, and this is reflected in the imposition of higher taxes. The only sectors that are experiencing growth in this depressed state of the nation's economy are East Germany's construction and retail industries. For most East Germans, the problem of unemployment presents an immediate danger, since a large portion of the workforce is already making do with 'short time' employment. An anemic response to commercial investment in the eastern region is expected as a result of wage adjustments based on existing rates in the west, regardless of productivity. Adding to these problems is the possibility of raising interest rates to control a possible spiralling of prices and wages.

Economic aspects, Germany, Unemployment, Recessions

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ASB's bombshell for business

Article Abstract:

The Accounting Standards Board's (ASB) first pre-exposure draft proposes dramatic changes to the profit and loss (P&L) account. The proposals include the elimination of the distinction between extraordinary and exceptional items, and the requirement for publishing details of discretionary expenditures, including advertising, training, and certain R&D expenditures. The proposed P&L statement includes vertical columns for income and expenditures from discontinued operations, acquisitions, trading, and a total. The ASB's proposals may be complex and confusing, but they are not misleading.

United Kingdom, Laws, regulations and rules, Accounting, Accounting Standards Board, Financial statements, Great Britain

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