NuPetCo: A “Tail” of Two Leases
The purpose of this case is to show how a change in an accounting standard can lead to a change in a firm’s financial performance and position even though the underlying economics of the firm are unchanged. The case focuses on a senior-level accountant of a privately held manufacturing company structured as two separate divisions. The accountant must present the divisional balance sheets and income statements to the board of directors both before and after the change in accounting for the company’s two major leases. The board will need to understand the high-level impact of the accounting change not only on the financial statements, but also on measures used in debt covenants and performance-based compensation.
Tarasovich, B., Lyons, B., & Hughen, L. (2020). NuPetCo: A “Tail” of two leases. IMA Educational Case Journal, 13(2).