Mike Mayo Takes on Citigroup (A)
Posted: 4 Feb 2012
Date Written: October 24, 2011
Abstract
The case details the conflict between Mike Mayo, an influential banking analyst, and Citigroup about what Mayo considers aggressive accounting policies. Mike Mayo questions Citigroup's lack of a valuation allowance against its deferred tax assets despite Citi's recent losses. The case discusses the economics of and accounting for deferred tax assets. It also focuses on management-analyst relations and challenges faced by analysts in providing a negative opinion on companies. The inclusion of deferred tax assets in Tier 1 capital and implications for regulatory capital are also discussed.
Learning Objective: The case can be used to discuss accounting quality in general and accounting for deferred taxes in particular. The case is also useful to discuss management relationship with analysts and the sell-side analyst industry.
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