Harnischfeger Corporation was a machinery based company based in Milwaukee, Wisconsin. The company had initially started as a partnership; however, in 1910 it was incorporated in Wisconsin under the name of Pawling and Harnischfeger. The company finally went public in 1929 and was listed in the New York Stock Exchange under the new name Harnischfeger. The company had two major segments of business P&H Heavy Equipment Group, which consisted of the construction equipment, the mining, and electrical equipment division. The second division consisted of the Industrial Technologies Group, which involved material handling equipment and the Harnischfeger engineers division. The company experienced a period of financial growth during the 1970s. Harnischfeger was very profitable growing from $205 million in revenues in 1973 to $644 million in 1980. The company made a mistake by depending on debt financing and the firm’s debt to equity ratio rose from 0.88 in 1973 to 1.26 in 1980. The company was hurt financially because of the recession in the 1980s, demand in the company’s products dropped and in turn adversely affected sales and the high interest payments resulted in poor profit performance. Collectively, this culminated to a reported loss in 1982 of $77 million. Accounting policy changes and estimates that Harnischfeger made during 1984 and the effect of these on the company’s 1984 reported profits are further explained in the following paragraphs. The Harnischfeger Company made accounting policy and accounting estimate changes as part of a corporate recovery plan. A plan which consisted of the following four criteria: changes in top management, cost reductions to lower the break-even point, restructuring of the company’s business, and debt restructuring and recapitalization. The company changed their fiscal year for foreign
