However, in the 1990s the company’s vision care sector ran into ethical accounting issues relating shipment of its product and the subsequent revenue recognition. The market for contact lenses began shifting away from traditional contact lenses, and instead became focused on the new frequent replacement and disposable lens model created by Johnson and Johnson (Maremont). Where Bausch and Lomb went wrong is, “The company increased reported revenues from sales of contact lenses and sunglasses by shipping the products to warehouses although there were no legitimate orders, by secretly agreeing to allow customers to return unwanted lenses and by recording sales in the fiscal year 1993 even though the items were not shipped until after the fiscal year ended on Dec. 25.” (Norris). This process is known as channel stuffing, and done by forcing...
... middle of paper ...
... better position than they truly are to encourage extra investment, and approval of new loans. The practice of channel stuffing, while beneficial in the short term, is very detrimental to a company’s long-term financial healt
"About Bausch + Lomb." Bausch + Lomb. N.p., n.d. Web. 16 May 2014.
Financial Accounting Standards Board (FASB). Accounting Standards Codification TM. Financial Accounting Standards Board (FASB), 2010. Web. 16 May 2014.
Maremont, Mark. "Numbers Game At Bausch & Lomb?" Bloomberg Business Week. Bloomberg, 18 Dec. 1994. Web. 16 May 2014.
Norris, Floyd. "Bausch & Lomb and S.E.C. Settle Dispute on '93 Profits." The New York Times. The New York Times, 18 Nov. 1997. Web. 16 May 2014.
Plunkett, Linda M., and Robert W. Rouse. "Revenue Recognition and the Bausch and Lomb Case." CPA Journal Sept. 1998: n. pag. CPA Journal. Web. 16 May 2014.
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