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Stirling Homex

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A Case Analysis on
STIRLING HOMEX CORPORATION

In partial fulfillment of the course requirements in
BA 219 Corporate Financial Reporting
WF Class 1830 – 1950, Section WFP
Term 1, A.Y. 2014-2015
October 10, 2014

Submitted by:
AÑORA, Maria Wilvenna
DELLAMAS, Gina
LAGUARDIA, Carlo Gerard
PANCHO, Mildred
REGIDOR, Jonas
RICAFORT, Allan Cris

Submitted to:
Dr. Arthur S. Cayanan

EXECUTIVE SUMMARY

The Case Analysis concentrated on the accounting practices employed by Stirling Homex Corporation which is a result of the SEC’s clarification of the Company’s revenue recognition methods. Specifically, the analysis focused on the company’s revenue recognition, profit allocation, and capitalization of expense procedures. Overall, the analysis aimed to identify any discrepancies in the Stirling Homex’s financial statements that made the SEC question the accuracy and fairness of the Company’s financial position and performance.

A structured methodology was performed by the Group in the analysis of the Financial Statements. In particular, the Group followed the following steps: 1) Analyze the existing accounting procedures employed by the Company, 2) Refer to the International Accounting Standards and Generally Accepted Accounting Procedures any irregularity that would be identified, 3) Pinpoint the effects of these irregularities (if any) on the Company’s published Financial Statements, and 4) Recommend how these irregularities should have been reported.

During the course of the analysis, there were a number of approaches in the preparation of the Financial Statement which did not conform to the International Accounting Standards. The approach led to the overall understatement of the company’s expenses, overstatement of revenues, which ultimately resulted in the overstatement of Stirling Homex’s net income. Further analysis of the Financial Statements also revealed

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