This course covers various issues relating to the exercise of managerial judgment in financial reporting. This case specially asks students to guess the warranty for the newly established company and demand the specific focus of the ethical issues that occur while estimating process. Students are obliged to consider the trade-offs that take place while valuating warranty expense: the impact on materiality, earnings management, accounting earnings, income vs. cash flows, entrepreneurship and ethical decision making. This is an extra-ordinary case which defines and discuss accurate accounting and the logic for expense estimation. The case was syllabized in first year Financial Reporting course in the Babson MBA program after students had taken an on-line module in ethical decision-making. Its addendum has also been part of Babson undergraduate first-year course, Introduction to Financial Accounting. Whilst an ethic-learning unit is not essentially a pre-requisite for the case. Basically the three philosophies of ethical thought being referred in this case (Duty, Consequences, and Character) need to be exposed by students and included as an addendum to the case.
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