Posted: December 3rd, 2022

A Comprehensive Analysis of the HRB Article

A Comprehensive Analysis of the HRB Article

instructions:
For the HBR article called Accounting Turbulence at Boeing, please provide a comprehensive analysis (not a summary). A typical formal case analysis might follow these guidelines:

Statement of problem or problem(s) facing the firm. State the problem(s) clearly and succinctly. Explain why you believe it (or them) is important. Include information on concepts from the course as needed.
Summary of the situation/analysis of issues. This is the section in which you may use tools such as a SWOT analysis or other analytical tools. Discuss only the information most relevant to the case. Remember that any analytical tool you use should demonstrably achieve some insights that will help you to make a final recommendation. This is the meat of your analysis and will demonstrate your thinking and depth of understanding of the case and course material.
Strategic alternatives and recommendations for strategy. Present a set of strategic alternatives, evaluate them, and then decide which is (are) best. This will be your recommendation. Your recommendation should follow logically from the statement of the problem and the situation analysis. I don’t have to agree with your recommendation for you to get a good grade, but I need to see the logical flow and justification clearly.
You should be able to present a professional analysis and not exceed two pages, single-spaced. Keep repetition of case material to a minimum, focus on analysis. Also, rmember to format your paper according to the APA guidelines.

A Comprehensive Analysis of the HRB Article
1. Statement of the Problem
The accounting methodology used by Boeing Company is that of program accounting. This approach has been used in recording the company’s commercial aircraft expenses since the 1980s. By using program accounting, the company is allowed to forfeit the use of the actual production costs but instead use an estimate of these costs for an aircraft. The approach is accepted by the U.S. Securities and Exchange Commission (SEC) as well as the U.S. Financial Accounting Standards Board (FASB). However, the use of program accounting undermined the effect of the relatively high costs imposed initially for the manufacture and tooling on the profitability of the company based on the development of a new model aircraft. The approach also created potential learning efficiencies that could mitigate the manufacturing costs in due time. The use of estimated costs over actual costs in accounting could be the primary reason for the fluctuation of the company’s financial performance. In 2017, Boeing had some positive results following the achievement of the company’s first deferred production costs significantly reduced on the 787 Dreamliner. However, the previous year had a negative financial result as the company’s stock by approximately 7% following the claims of being investigated by the SEC on its 787 Dreamliner model.
Such a situation finds Laurie Pitcher at a tough spot while she tries to handle and manage the clients’ concerns on assessing the implications of such a reduction in stock percentage for the company as well as its implications. As an investment advisor, Laurie is tasked with explaining to Boeing’s clients how the method of program accounting is applied and the rationale behind it, as well as the implications of the current upheavals and the rivalry with its major competitor Airbus on the company’s value. In this regard, the primary issue revolves around the concerns raised by people to understand the company’s approach towards sustainability and productivity. This is through the critical Assessment of the relevance and applicability of the program accounting method that requires an auditing intervention from a reliable and external source; the SEC. With news of criticism against Boeing going round within the marketplace, the company risks its brand name that could adversely affect its reputation and credibility that have taken over 20 years to build. The situation calls for effective and competent measures that could ensure that the issue is substantially attended to and managed to protect the company’s brand name that would damage its relevance in the market. With a proper approach to manage the issue, Boeing could promote the satisfaction of its client and assure them of their investment with the company that is necessary for the development of a mutually beneficial relationship.
2. Analysis of Issues
SWOT Analysis
Strengths Weaknesses
Boeing is one of the renowned airline companies with an experience of over 20 years in operation. By 2016, the company’s aircrafts added up to 35% of the total number in the world. This shows the strength of the company in the market as it has established deep roots across the competitive environment that give the company an added advantage over other players in the market. Boeing has continued to use a method of accounting that does not promote efficiency and future sustainability. The program accounting approach might be relevant, but in an increasingly globalized and modernized economic environment, the company must develop a more reliable approach for accounting.
Opportunities Threats
Based on the challenges that have faced the company, it is crucial to focus on the points of improvement. Boeing has the opportunity to increase its operations across the untapped markets following the increased globalization practices that are associated with a significant market gap. The primary threat facing the company is the increased competitiveness from companies such as Airbus that have embraced more reliable and substantial sustainability approaches, especially across their financial processes and procedures.

3. Strategic Alternatives and Recommendations
For the company to maximize on its operations and increase its performance across the highly competitive environment, it is imperative for its managerial team to adopt and implement a more reliable accounting approach. Since program accounting has proven to be ineffective, Boeing could focus on other methods of accounting that focus on the use of actual costs of value rather than estimates. Some alternative accounting methods that could be used by this company are; cash and accrual accounting practices.

References
Heese, J., Srinivasan, S., Lane, D., & Barnett, J. (2017). Accounting Turbulence at Boeing.

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