The Rump Organization
MEMORANDUM
To: Dr. John J. Morris, Department of Accounting
From: Group #1 (Matt Meenen, Bailey Ochs, Allison Olive, Marit Pavek)
Date: 04/03/2014
Subject: Case 08-6, The Rump Organization
Statement of Relevant Facts:
The Rump Organization, a SEC registrant, is planning a corporate restructuring plan. On December 27, 2005 Ronald Rump, the CEO of the organization, along with the Board of Directors approved a plan to involuntarily terminate 100 of the organization’s employees. There is an option for each of the employees to sign a litigation waiver, which forfeits any right they have for legal action against Rump. In exchange for their voluntary signing of the waiver, Rump will offer each employee a lump-sum cash payment equivalent to one month’s salary. If they refuse to sign the waiver they will not receive any severance benefits. The employees in question will not be able to retain their job regardless of whether the waiver is or is not signed. There are a few additional facts presented along with the case:
The corporate restructuring plan identifies the number of employees to be terminated, job classifications, and locations of the employees.
The completion date of the plan is January 31, 2006 and employees are allowed to leave Rump at any time on or before the date of completion. The employees must sign the waiver before this date in order to claim their severance benefits.
On December 31, 2005 all of the employees affected by the plan were e-mailed a summary of the plan’s terms and were informed about the option to sign the litigation waiver.
Rump believes that there will be no significant change to the plan and asserts it will not be withdrawn before the execution. Rump does not have a policy on severance payments made to employees but in the past has offered benefits to employees being terminated due to workforce reduction plans.
Identification of Issues and Alternatives:
The primary question asked in the case is if Rump should recognize a
To: Dr. John J. Morris, Department of Accounting
From: Group #1 (Matt Meenen, Bailey Ochs, Allison Olive, Marit Pavek)
Date: 04/03/2014
Subject: Case 08-6, The Rump Organization
Statement of Relevant Facts:
The Rump Organization, a SEC registrant, is planning a corporate restructuring plan. On December 27, 2005 Ronald Rump, the CEO of the organization, along with the Board of Directors approved a plan to involuntarily terminate 100 of the organization’s employees. There is an option for each of the employees to sign a litigation waiver, which forfeits any right they have for legal action against Rump. In exchange for their voluntary signing of the waiver, Rump will offer each employee a lump-sum cash payment equivalent to one month’s salary. If they refuse to sign the waiver they will not receive any severance benefits. The employees in question will not be able to retain their job regardless of whether the waiver is or is not signed. There are a few additional facts presented along with the case:
The corporate restructuring plan identifies the number of employees to be terminated, job classifications, and locations of the employees.
The completion date of the plan is January 31, 2006 and employees are allowed to leave Rump at any time on or before the date of completion. The employees must sign the waiver before this date in order to claim their severance benefits.
On December 31, 2005 all of the employees affected by the plan were e-mailed a summary of the plan’s terms and were informed about the option to sign the litigation waiver.
Rump believes that there will be no significant change to the plan and asserts it will not be withdrawn before the execution. Rump does not have a policy on severance payments made to employees but in the past has offered benefits to employees being terminated due to workforce reduction plans.
Identification of Issues and Alternatives:
The primary question asked in the case is if Rump should recognize a