Coca-Cola Accused of Channel Stuffing
Â
Â
Coca-Cola is the most valuable brand in the world. Founded in and successful since the late 1800s, it is now considered the largest beverage company in the world—with customers in more than 200 countries.Â
Â
Accountants summarize the information from a firm’s business transactions in various financial statements for a variety of stakeholders, including managers, investors, creditors, and government agencies. Many business failures may be directly linked to ignorance of the information “hidden” inside these financial statements. Likewise, most business successes can be traced to informed managers who understand the consequences of their decisions. While maintaining and even increasing short-run profits is desirable, the failure to plan sufficiently for the future can easily lead an otherwise successful company to insolvency and bankruptcy court.
Â
Â
Read the case below and answer the questions that follow.
Â
Â
In the mid-2000s, Coca-Cola was accused of channel stuffing. Channel stuffing occurs when the demand for a product is inflated because a company sends extra inventory to wholesalers or retailers at an unsustainable rate. Essentially, a company sends products to distributors and counts these shipments as sales—although the product often remains in warehouses or is later returned. This behavior can inflate earnings and mislead investors. Companies resort to channel stuffing to show a false increase in sales. Many companies have been accused of channel stuffing, including, Coca-Cola, Krispy Kreme Donuts Inc., Harley-Davidson Motorcycles, Clear One Communications, Symbol Technologies, Network Associates, and Intel.
Â
Coca-Cola was accused of sending extra concentrate to Japanese bottlers from 1997 through 1999 in an effort to inflate its profit. In January 2004, former finance officials for Coca-Cola discovered statements of inflated earnings based on the company’s shipping extra concentrate to Japan. Although the company settled the allegations, the SEC (Securities and Exchange Commission) found evidence that channel stuffing did occur. However, Coca-Cola had pressured bottlers into buying additional concentrate in exchange for extended credit. Therefore, the sales were technically considered legitimate.
Â
To settle with the SEC, Coca-Cola agreed to avoid channel stuffing in the future. The company created an ethics and compliance office and is required to verify each financial quarter that it has not altered the terms of credit or extended special credit. Coca-Cola also agreed to reduce the amount of concentrate held by international bottlers. Although the company settled with the SEC and the Justice Department, it still faced a shareholder lawsuit regarding channel stuffing in Japan, North America, Europe, and South Africa. Despite its reputation as a responsible corporate citizen, Coca-Cola has found it difficult to balance ethics and responsibility to shareholders, complying with legal requirements on reporting earnings, and maintaining the bottom line.
Â
Â
 1.
Â
Â
Â
Coca-Cola was accused of creating and processing _________ during specific time periods to positively impact financial statements.
Analysis
Customers
Transactions
Documents
Â
 2.
Â
Â
Â
The act of channel stuffing causes _____________ on Coca-Cola’s financial statements.
Increased customers
Decreased profit
Increased revenue
Increased inventory
Â
 3.
Â
Â
Â
_________ use accounting information to make decisions, plan and control.
Governments
Managers
Creditors
Stockholders
Â
 4.
Â
Â
Â
Which financial statement shows a detailed increase/decrease of transaction payment types?
Balance sheet
Income statement
Statement of cash flows
All of the above
Â
 5.
Â
Â
Â
Which federal government agency provides rules, policies and requirements for accounting firms and companies?
Treasury Department
Public Accounting Oversight Board
Securities and Exchange Commission
Government Accounting Assurance Policy
Our Service Charter
-
Excellent Quality / 100% Plagiarism-Free
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers. -
Free Revisions
We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed. -
Confidentiality / 100% No Disclosure
We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service. -
Money Back Guarantee
If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit. -
24/7 Customer Support
We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.