StudentShare solutions
Triangle menu

Drabinsky and Gottileb: Accounting - Case Study Example

Nobody downloaded yet
Since the company was incurring heavy losses, so the two devised this kickback scheme that would help them gain a significant share of profit before paying dues of other shareholders. The vendors supplied Livent with inflated bills. There was in fact no activity that can be regarded as reasons for the inflated bills. As a result of the kick-back schemes and huge losses, Livent Inc started fudging the real data with false data. In order to make the company look financially sound and profitable, the two conspirators decided to create software that will help to create a systematic way of manipulating the financial data. These points to another instance of fraud scheme at Livent. The manipulation involves simple erasing from the accounting records expenses and liabilities that occur at the end of each quarter. In accounting standards this is illegal, since this inflates the profit artificially. In order to decrease the expenses the reproduction costs from a currently running show are transferred to an ongoing show. In accounting standards this cannot be done, since only those costs can be realized that have incurred and not those that are yet to occur. (Bajaj, 2001). This allowed the amortization of costs indefinitely. This is also illegal since certain costs can be amortized for certain period only. Livent accountants transferred the costs to fixed asset accounts to enjoy long term of amortization periods, for as long as forty years instead of the usual 5 years. This is not allowed in accounting standards since prepaid expenses can be capitalized as assets but cannot be amortized over a period of forty years. The Livent accountant debited the salary expenses and operating expenses to long term fixed asset accounts, although the same cannot be done under the accounting standards and rules. The scope of considering prepaid expenses as asset is restricted and involves only few items like rent expenses, power bill expenses, stationary items expenses. The massive manipulations did not serve the purpose they were supposed to serve in the first pace itself. So Livent executives devised more elaborate fraud schemes like “fraudulent-revenue generating schemes”. In this particular fraud scheme, the production rights owned by Livent were sold to third parties. The contract indicated that under no circumstances the fee of $1.2 paid by a Texas based company is refundable (Bonaccorsi and Daraio, 2009). In reality a secret pact was signed that indicated Livent would indemnify the Texas Company in case of losses by agreeing a reasonable rate of return. In accounting standards although the fee received can be treated as revenue but the deliberate way in which the expenses related to the payment of interests (in case of loss) undermines the expenses to the business. Thus, the profit is inflated in an artificial way. Livent inflated the box office results for key productions. In order to make sure that the revenue generated from Broadway does not fall below the anticipated level, the company illegally paid two vendors to buy all the tickets at Los Angeles. The payment made to the vendors are not considered as expenses but charged to fixed assets. If they are to be charged to the fixed assets, they have to be treated as prepaid expenses, although the expenses can never be treated as prepaid expenses in the first place itself. So this is another instance of gross ...Show more


Drabinsky and Gottileb operated a kickback scheme from 1990 to 1994. In the kickback scheme two Livent vendors are appointed who helped Drabinsky and Gottileb, siphon millions of dollars from the company directly into their own pockets…
Author : ysatterfield
Drabinsky and Gottileb: Accounting Case Study essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the case study on your topic
"Drabinsky and Gottileb: Accounting Case Study"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Finance and Accounting Case Study
In most cases, the accounting majors work internally to the company and their actions are limited to the internal operations of a company or organizations. Therefore, majority of the times accounting majors are responsible and accountable to the organizations management and shareholders.
3 pages (750 words) Case Study
Management accounting case study
In addition to Exhibit 1.5, a number of other tables – Exhibit 1.1, 1.2, 1.3 and 1.4 have been provided in the attached Excel Spreadsheet. These provide information on the cost of different activities and cost objects. Relative Profitability of the Courses The application of activity based costing (ABC) system to The University of Australia has provided information that will help to determine the relative profitability of the courses offered.
5 pages (1250 words) Case Study
Management Accounting College Case Study
Armed with a new business model aimed at customers who prefer lower-priced, no frills travel, Southwest Airlines soared, ascended and earned the title of being the largest airline in terms of passengers carried domestically per year (Sorensen 2006). As with any business organization, the profitability of the operation of Southwest Airlines is determined by the amount of revenue that it can generate versus the amount of costs that it incurs for the period (Garrison et al, 2007).
4 pages (1000 words) Case Study
Accounting Case Study Excercises; Texas Hold'em
Miguel should amortize the license over the short of the useful life or the legal life. The summary on statement no.142 issued by the Financial Accounting Standards Board (FASB). The shorter life would be a
1 pages (250 words) Case Study
Accounting case study on BP p.l.c
Its production of gas and oil in the year 2012 was the sixth largest in the world and is amongst what are referred as the “supermajors” in the production of gas and oil. It is a vertically integrated company
7 pages (1750 words) Case Study
Accounting case study analysis
However, there is a rule that states that the revenues and expenditures ratio for a charitable organisation should not exceed 25 percent. The rule helps to prevent donors from being exploited by
1 pages (250 words) Case Study
The Ave-Co Plc seeks for a solution. This executive report presents two mind maps and the following analyses to the management team: first, the problem faced by BH (both control and finance). Second, the strategic management
4 pages (1000 words) Case Study
Accounting Case Study
The total sales amount to 975,000 US dollars which very far from the maximum potential in relation to the amount of books sold. CPP ought to demand top-quality written work, altering, and configuration. The company ought to help about 50% of the expenses, and offer the
1 pages (250 words) Case Study
The main aim of the loan according to CCL is to increase the number of trucks. Loan recommendation: Basing on current payments and future estimated profits by CCL, the loan request approval is
2 pages (500 words) Case Study
Case Study Managerial Accounting
With reference to Carl Warren, James Reeve, Jonathan Duchac(2011), traditional costing is more simplistic and less accurate than ABC, and typically assigns overhead costs
1 pages (250 words) Case Study
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Let us find you another Case Study on topic Drabinsky and Gottileb: Accounting Case Study for FREE!
Contact us:
Contact Us Now
  • About StudentShare

  • Testimonials

  • FAQ

  • Blog

  • Free Essays
  • New Essays
  • Essays

  • The Newest Essay Topics
Join us:
Contact Us