Case Study (Tyco International LTD) - Easy Work

(Tyco International LTD) - Easy Work - Case Study Example within the multi-step income statement such as extraordinary activities demonstrate lack of transparency in business reporting and this justifies prohibition of IFRS for the presentation of extraordinary activities within the income statement. Tyco is characterized by acquisitions which aim at diversifying globally which has made it to have a highly decentralized structure. The working culture of the organization is motivated by the pursuit for continual growth and development. The company has many divisions which report to the head office. The decentralization within the company has led to the need for each of its divisions reporting their own financial statements separately. The senior management is the corporate office has led to aggressive reporting of financial statements by the company’s divisions through the high targets that they are expected to meet. Capitalization is the conversion of income into the value that the property that raised the income is estimated to be worthy. Capitalization also refers to the estimation of the present value of income for future earnings or payments. The $200 cash collection from the dealers of Tyco’s ADT subsidiary should be recorded as operating income. The operating income of a company must be included in its financial statement to enable accurate determination of the earnings of the company in relation to its expenses (Roxas 56). The $200 that was paid to the dealers as a growth bones would be equated to the same amount of income from the dealers if it is not capitalized and thus lead to an overall balancing of the financial statement. The fraud that Tyco was involved in led to an exaggeration of its operating income. The $1.76 billion should be recorded within its multi-step income statement as sales returns under the sales revenue of the operating section instead of categorizing this amount as gains from discontinued operations. This is because the IPO which generated the amount is a sale of one of the