As discussed in class, it has been suggested that Helen of Troy, Ltd. is somewhat â€œaggressiveâ€ regarding the capitalization of certain costs. In particular, Helen of Troy indicates that â€œGeneral and administrative expenses in inventory include all the expenses of operating the companyâ€™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 Troyâ€™s CEO was not impacted by this assumption, the CEOâ€™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 Troyâ€™s Annual Report, Proxy Statement, and other SEC filings in the Investor Relations section of their website: