Magic carpet ride a financial reporting case

Larry Watkins, Roxanne Stell

Research output: Contribution to journalArticlepeer-review


The primary subject matter of this case concerns corporate financial reporting for a publicly traded company. Secondary issues examined include distinguishing between inventory and property, plant, and equipment, impairment of assets, project termination, discontinued operations, and environmental disposal costs of assets all based on research in the Financial Accounting Standards Board's Accounting Standards Codification. The case has a degree of difficulty consistent with senior level or graduate accounting courses. The case is designed to be taught in one class period and is expected to require six to ten hours of outside preparation by students. Mecca Media's first foray into online entertainment is causing Joe Dixon, the somewhat colorful CEO of this small public company, more than a little discomfort. Mecca has invested millions in intellectual property rights, PP&E (property, plant and equipment), and (TV) set-top boxes, in addition to committing to a multi-year consulting agreement. Over a year into the Magic Carpet project, revenues are disappointingly below projections and now the CFO and the Board of Directors are questioning the viability of the project. In hopes of stemming the negative cash flow, the CFO has proposed drastically scaling back Magic Carpet and now she must determine the financial reporting consequences of her suggested actions. This requires significant research and analysis in the FASB's Accounting Standards Codification to satisfy the Board of Directors, Mecca Media's auditors, and her own personal standards.

Original languageEnglish (US)
Pages (from-to)27-32
Number of pages6
JournalJournal of the International Academy for Case Studies
Issue number3
StatePublished - 2013

ASJC Scopus subject areas

  • Business and International Management
  • Education
  • Law


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