Unusual/conflicting Accounting Principle at General Motors
General Motors is the largest car manufacturer and distributor in the world. Despite its global presence, the firm has been faced with severe financial problems which have led to its bankruptcy and subsequent restructuring. The various departments of the firm are to blame for the financial woes as the poor networking in the firm may have contributed to the unusual problem.
Departmental strengths, weaknesses and recommendations
The sales and marketing department is involved in the development on new marketing strategies aimed at increasing sales of the products. Similarly, the sales sector ensures that new markets are established with the existing markets being maintained. This department has been conducting adequate marketing in all the GM markets although the department has failed to include modern forms of marketing to tap the unoccupied markets. Modern marketing entails use of combined efforts to make the brand relevance at all times (Canis, 2011).
The quality assurance department engages in testing services such that the finished cars are subjected to test driving before release into the market. The department has not established a good rapport and connection with other departments to reduce mishaps concerned with vehicle quality. However, the quality department has always compensated and promised existing clients of quality at all times. These mishaps could be reduced if this department was to work hand in hand with the others in the company (Canis, 2011).
The accounts department at GM carries out all the financial activities at the firm but recently there have been many financial problems which may have contributed to the bankruptcy in the firm. Presence of two top posts in the department was a weakness that led to the errors but this has been strengthened by reshuffling of the positions. Similarly, the firm can include the consultants AlixPartners as active members in the department to help increase accountability (Canis, 2011).
The firm has been on the news due to the bankruptcy problems which were attributed to altering the results of the first quarter such that the accounting department fails to release the true figures which were attained. The restated first quarter results often lead to miscalculations such that management is made to believe that business is running well yet there is a huge loss in the background. Other accounting errors which were present prior to the bankruptcy include lack of accountability and poor record keeping such that there were more eyes on the financial statements than required (Canis, 2011).
Alternative courses of action
Other than resorting to restructuring of the accounting department to reduce the conflicts, the firm should establish frequent and reliable auditing services which will be availed to point out anomalies in time. This will make it easier for GM to identify the accountants who are not competent and who fail to meet the firm’s goals so that they are replaced by reliable accountants. The department should also be restructured in a way that only those who have broad experience hold top positions. The effects of such actions are that restatement of facts will be eliminated as well as avoidable accounting errors (Canis, 2011).
Options that are consistent with the organizations structure
The option of carrying out restructuring of the department is in line with General Motors structure as most of the top employees will be completing their contract at the time of restructuring. Similarly, the idea of hiring competent and seasoned accountants will be coincidental with the restructuring process hence the two are consistent (Canis, 2011).
Accounting results for the last two years
- 2008 2007
Period End Date 12/31/2009 12/31/2008 12/31/2007
Period Length 12 Months 12 Months 12 Months
Stmt Source PROSPECTUS PROSPECTUS PROSPECTUS
Stmt Source Date 08/18/2010 08/18/2010 08/18/2010
Stmt Update Type Updated Update Updated
- 104,116.0 147,732.0 177,594.0
Other Revenue, Total 473.0 1,247.0 2,390.0
Total Revenue 104,589.0 148,979.0 179,984.0
Cost of Revenue, Total112,195.0 149,257.0 165,573.0
Gross Profit - 8,079.0 -1,525.0 12,021.0
Expenses, Total 12,359.0 19,050.0 15,959.0
- 0.0 0.0 0.0
- 190.0 749.0 1,259.0
Operating 0.0 0.0 0.0
(Income) -126,878.0 567.0 552.0
Expenses, Total 751.0 409.0 545.0
Operating Income 105,943.0 -21,187.0 -4,309.0
Non-Operating 0.0 0.0 0.0
Gain (Loss) on
Sale of Assets 0.0 0.0 0.0
Other, Net 0.0 0.0 0.0
- 102,493.0 -29,471.0 -6,346.0
Income Tax – Total -2,166.0 1,766.0 36,863.0
Income After Tax 104,659.0 -31,237.0 -43,209.0
Minority Interest -396.0 108.0 -406.0
Equity In Affiliates 558.0 186.0 524.0
- 0.0 0.0 0.0
Items 104,821.0 -30,943.0 -43,091.0
Total Extraordinary Items 0.0 0.0 4,549.0
Net Income 104,821.0 -30,943.0 -38,542.0
Retrieved from: MSN (2010)
Canis, B. (2011), .S. Motor Vehicle Industry: Confronting a New Dynamic in the Global Economy. DIANE Publishing
MSN (2010), General Motors financial statements. Retrieved on December 9, 2010 from: moneycentral.msn.com/investor/invsub/.../statemnt.aspx?...gm