Assignment 4-4
Shane Rittenhouse
Acct.310
Ann Remely
6/5/13

Issue
During the fourth quarter of 2010 Green Mountain Coffee Roasters had some accounting irregularities become known to the public. Green Mountain’s problems all started from how they recognized income, though intercompany inventory and third party vendor. After the SEC inquiry, Green Mountain’s accounting irregularities spanned three fiscal years and three fiscal quarters. Starting with fiscal year 2007 and running through the third fiscal quarter of 2010.
In total Green Mountain had five areas of their financial statements in which they did not follow GAAP. The first issue overstated $7.6 million dollars of inventory during the time period, because of an incorrect standard of cost (Dulong, 2010). Next they had a $1.4 million overstated income, because of incorrect accrual amount of incentive programs expenses. Third issue overstated income by $1 million dollars, because of timing classification of historical revenue royalties from third party vendors. Fourth issue overstated $800,000 of income, because of incorrect standards for intercompany inventory cost. Fifth is an understated income of $700,000, because of a failure to reverse accrual customer incentive program. All amounts in this report are amount of pre-income tax earnings.

Rule During this time period Green Mountain has violated three rules from the FASB accounting standards codification: inventory measurement, revenue recognition and multi element revenue recognition. Although the SEC had found more problems than just three, the issues at Green Mountain can be classified into these three areas. The SEC did conduct an 18 month inquiry only, into the financial statements of Green Mountain, costing the company about $4 million dollars (10-k form, 2011)
. The first FASB code violated is 330-10-35 or Topic-inventory,