The case of Lehman Brothers Holdings Inc. is only one of a number of high-profile cases that have highlighted the role of financial reporting and the issues surrounding earnings management in recent years. The flood of these so-called ‘accounting scandals’ and the alarming increase in accounting revisions and restatements has drawn the attention around the globe by accounting researchers and the popular press alike. The principles-based versus rules-based standards debate is discussed and illustrated with the case of Lehman’s accounting for Repo 105 transactions, which clearly highlights the issues that this debate raises.
This article is from the Accounting Instructors’ Report, an electronic journal that provides teaching tips and insights to those who teach accounting and other business courses.
Belverd E. Needles, Jr., Ph.D., CPA, DePaul University