Harnischfeger Corporation

Questions 1. Identify all the accounting policy changes and the accounting estimates that Harnischfeger made during 1984. Estimate, as accurately as possible, the effect of these on the company? s 1984 reported profits.

2. What do you think are the motives of Harnischfeger? s management in making the changes in its financial reporting policies? Do you think investors will see through these changes? Answers 1. Identify all the accounting policy changes and the accounting estimates that Harnischfeger made during 1984.

Estimate, as accurately as possible, the effect of these on the company? s 1984 reported profits. a. Changes that affect the Harnischfeger Revenues:
• The company start to account Kobe Steel sales in US, previously it only add the gross margin in the financial statement. (this sales represents $28 millions)
• Sales to a foreign subsidiary starts to be consolidated as a net revenues (this sales represents $5,4 millions) b. Changes that affect the Harnischfeger profitability:
• Change in the depreciation accounting method from accelerated to straight line method.