Lone Star Power

Abstract

Lone Star Power was a midsize power-generation and power-distribution company. The company's new chief investment officer must evaluate a number of financial-reporting issues raised by an outside analyst. Those issues relate to (1) revenue recognition, (2) consistency of accounting policies, (3) expense timing, (4) classification of reported line items, (5) supplemental interpretive guidance from management, and (6) interim voluntary disclosures. Using a very simple setting, the case blends issues of financial transparency, financial accounting, SEC reporting requirements, and Reg. FD disclosures.

Keywords: accounting, inflation, financial reporting and disclosure

JEL Classification: M41, M44, M45, G29, G38