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Show evidence.
Table 1: Comparison of ALZA R&D Revenue and TDC R&D Expense (in millions) 1993 ALZAs Product Development Revenue from TDC TDCs R&D Expense to ALZA $4.9 1994 $31.6 1995 $70.1 1996 $100.7 1997 $67.8 Total $275.1
$4.9
$31.6
$68.9
$100.0
$48.6
$254.0
Table 2: Comparison of ALZA R&D Revenue and Crescendo R&D Expense (in millions) 1997 $29.7 $32.3 1998 $95.0 $106.0 1999 $90.5 $97.7 2000 $68.3 $42.2 Total $283.5 $278.2
ALZAs Product Development Revenue from Crescendo Crescendos R&D Expense to ALZA
Total revenue from TDC and Crescendo = $558.6 million ($275.1 + $283.5)
Total R&D expense from TDC and Crescendo = $532.2 million ($254.0 + $278.2) Did not consolidated TDC and Crescendo
ALZA increased revenue by $558.6 million and recorded its own R&D expense on its own financial report
Effect: overstate revenues and net income
Do you agree with the claim in ALZAs financial reports that the impact on net income of the TDC and Crescendo arrangement was not significant? Why and why not? Show evidence.
1993
1994
1995
1996
1997
1998
1999
2000
Total
$45.7
$4.9
$58.1
$31.6
$72.4
$70.1
$92.4
$100.7
($261.1)
$97.5 $247.0
$108.3
$95.0
$91.0
$90.5
$223.3 $430.1
$68.3 $558.6
$40.8
$26.5
$2.3
($8.3)
($111.6)
$13.3
$0.5
$155
$118.5
Agree
Do you think those the standards of financial reporting were adequate? Why?
Inadequate