As discussed in class, it has been suggested that Helen of Troy, Ltd. is somewhat “aggressive†regarding the capitalization of certain costs. In particular, Helen of Troy indicates that “General and administrative expenses in inventory include all the expenses of operating the company’s sourcing activities, expenses incurred for production monitoring, and expenses incurred for product design, engineering and packagingâ€.
Suppose that Helen of Troy had always expensed these costs, rather than initially capitalizing and subsequently expensing them. Assuming that bonus structure for Helen of Troy’s CEO was not impacted by this assumption, the CEO’s bonus for the year-ending February 28, 2011 would have been:
$ __________________ HIGHER / LOWER than the actual bonus
that was paid to the CEO based on their actual accounting policies.
You may find Helen of Troy’s Annual Report, Proxy Statement, and other SEC filings in the Investor Relations section of their website:
http://www.hotus.com
