This case provides a rich environment in which students can explore the challenges of applying Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Investments, and Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. By focusing on the stock performance of two technology firms, Lucent Technologies and Microsoft, the case exposes students to issues of determining when a stock price decline is other than temporary, the effects of timing on accounting reporting decisions, and the role of the auditor in determining fair financial reporting. The case provides a qualitative and quantitative application of the two standards that is more complex and less structured than that provided by an intermediate financial accounting text. The case also demonstrates that comprehensive income, unlike net income, is relatively stable and difficult to manipulate.
