Le Nature Inc Case Summary
Hermann Joseph
Contemporary Issues in Intermediate Accounting
ACC 304
Prof: Dr Pinto Joanne
Le Nature’s Plunge Roils Markets by “Peter Lattman” Wall Street Journal Nov 7, 2006 (C1-C5). The case of Le Nature Inc was an indication of the fragility of the debt markets. On Tuesday November 7, 2006 in its section “Money & Investing” Wall street Journal reported the collapse of Le Nature Inc. Founded in 1989 by “Gregory Podlucky” this closely held beverage company specialized in producing and selling drinks: flavored water, vitamin juice. Le Nature Inc went to bankruptcy under the allegations of financial wrongdoing such as falsification of financial statements and documents shredding. A court –appointed Mr. Steve Panagos as the custodian. Short time after taking function Mr. Panagos revealed that Le Nature Inc had overstated its revenues by $243 million US dollar, from 275 million posted in the financial statements compare to 32 million worth in the audited statements. He also found two sets of books; two safes and jewelry which made him believe that unsupported transactions were taken place.
Just one year before its collapse, Le Nature Inc was seen as one of a fast growing and undervalued companies where big profit could be made. The company was up for …show more content…
As the value of the company’s bonds and bank loans sank, this gave rise to bad debt expenses on (bank’s loans) and losses on (outstanding bonds). The bank loans became impair (55% of bank loans may not be recovered) as result GAAP requires adjustment to be made to reflect this event. Tough, bad debt will increase and loan receivable would reduce. For the bonds we believe that it would appropriate for investors to use “fair value measurement” since they incurred significant losses (bonds were downgraded by 85% of the face value). Fair value measurement would provide a better basis for assessing future cash
Contemporary Issues in Intermediate Accounting
ACC 304
Prof: Dr Pinto Joanne
Le Nature’s Plunge Roils Markets by “Peter Lattman” Wall Street Journal Nov 7, 2006 (C1-C5). The case of Le Nature Inc was an indication of the fragility of the debt markets. On Tuesday November 7, 2006 in its section “Money & Investing” Wall street Journal reported the collapse of Le Nature Inc. Founded in 1989 by “Gregory Podlucky” this closely held beverage company specialized in producing and selling drinks: flavored water, vitamin juice. Le Nature Inc went to bankruptcy under the allegations of financial wrongdoing such as falsification of financial statements and documents shredding. A court –appointed Mr. Steve Panagos as the custodian. Short time after taking function Mr. Panagos revealed that Le Nature Inc had overstated its revenues by $243 million US dollar, from 275 million posted in the financial statements compare to 32 million worth in the audited statements. He also found two sets of books; two safes and jewelry which made him believe that unsupported transactions were taken place.
Just one year before its collapse, Le Nature Inc was seen as one of a fast growing and undervalued companies where big profit could be made. The company was up for …show more content…
As the value of the company’s bonds and bank loans sank, this gave rise to bad debt expenses on (bank’s loans) and losses on (outstanding bonds). The bank loans became impair (55% of bank loans may not be recovered) as result GAAP requires adjustment to be made to reflect this event. Tough, bad debt will increase and loan receivable would reduce. For the bonds we believe that it would appropriate for investors to use “fair value measurement” since they incurred significant losses (bonds were downgraded by 85% of the face value). Fair value measurement would provide a better basis for assessing future cash