Interstate Transport, Inc.: A Case Study in Earnings Management

This case asks student teams to make a number of accounting decisions in the context of a single company. The decisions address the allowance for bad debts, inventory valuation, depreciation lives and methods, contingency provisions, and accounting for off‐book entities. The case setting requires you to address those issues in an integrated way, and establish a rationale for the decisions required. The teamwork required illustrates the way differing personal judgments, regarding both facts and principles, enter into the determination of net income. Whether you mean to or not, your teams will be practicing “earnings management.”