Instructional Case: Accounting Method Choice in the IPO Process.

Immediately prior to going public, a medium-sized Hong Kong property development company switches from the completed contract to the percentage-of-completion revenue recognition method. Students are required to play "financial detective" and infer a reason for the switch. Using only the publicly available prospectus data, students reconstruct a proforma pre-issue balance sheet and "undo" the effects of the accounting switch. In so doing they discover a direct link between a large, pre-listing dividend and the switch. While the focus is on the dividend/method choice link, opportunities are provided for students to address, at a more general level, the motivations for changes in accounting methods.