Abstract The objective of this case study is to illustrate the economic consequences that may result from mandated changes in generally accepted accounting practice. The case provides a forum to evaluate the operational and financial statement impact of SFAS No. 94 on companies with unconsolidated financial subsidiaries in general, and the Ford Motor Company in particular. Using excerpts from Ford's 1984 profit sharing agreement with the UAW, students are asked to estimate the potential economic cost of the new standard to the company. Students become aware that while the financial statement consequences of changes in GAAP can be quite dramatic, a change per se need not have implications for firm value unless there are direct or indirect cash flow consequences of the type implied by Ford's profit sharing agreement.
Whittred et al. (Fri,) studied this question.