Revenue Regognition and FOB Sales Accounting
1. Statement of problem or problem(s) facing the firm.
Biovail Corporation was one of the Canada’s largest publicity trade pharmaceutical companies. Biovail Corporation released guidance for the quarter ended September 30, 2003 indicating that revenues would be in the range of $ 215 million and earnings per share of $0.35 to $ 0.45 both below previously issued guidance, they associated the loss of revenue and income with a significant in-transit shipment loss of Wellbutrin XL, to a traffic accident where the truck which carrying the shipment was involved near to Chicago, Illinois. The Company estimated that revenue associated with the shipment was in the range of $ 10 million to $ 20 million. After some research and investigation was found that the true value of the merchandise in the truck was approximately $ 5 million. This accident had no effect on the quarter ended September 30, 2003 earning like Biovail intentionally and falsely attributed. The Biovail Corporation executives were obsessed with meeting quarterly and annual earnings they overstated earning and hid losses in order to deceive investor and created the appearance of achieving goal. Because these issue they were involved in a very serious unethical misconduct and chronic fraudulent conduct, including financial report fraud and other intentional public misrepresentations. 2. Summary of the situation/ analysis of issues
Biovail Corporation SWOT Analysis
• Biovail had applied advanced drug-delivery technologies to improve the clinical effectiveness of medicines •Biovail commercialized its products in Canada and internationally •Biovail’s core competency was its expertise in the development and large-scale manufacturing of pharmaceutical products.
•Poor managerial strategy to meet goals.
•Managerial unethical conduct and not reliability data enter accounting record • Bad reputation due...