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Case 7-8 Monsanto Company Roundup
1. Monsanto is a chemical and agriculture seed company that manufactures glyphosate
and sells it. The rebate programs of Monsanto are governed through account standards with
the settings of FASB Emerging Issues Task Force (EITF) Issue no. 01-9. In this case, Issue 6
of EITF Issue no. 01-9 is in need of a vendor like Monsanto, who can help to determine the
rebate obligation to reduce the revenue on the basis of a rational or systematic allocation of
the cost. Similarly, Issue no 4 of EITF Issue no. 01-9 needs a vendor to identify the certain
sales incentives cost at the later of either the sales incentive offered date or the recognized
related revenue date. Moreover, Issue no 1 of EITF Issue no. 01-9 gives focuses on the
circumstances where a vendor may record the customer’s payments as an expense or a cost
instead of a revenue reduction. Overall, the EITF Issue no. 01-9 needs a vendor like
Monsanto to determine the payments to customers for working or performing on behalf of
their service that has provided more benefits to the vendor. In case the customer’s services
are not profitable and beneficial to the vendor, then it must identify the total amount as the
revenue reduction.
In this case, the failure has been seen in accounting because the accountant did not perform
their task properly. The accountant did not record the rebate of customers in a proper way,
which resulted in reflecting in the misstated financial statement. Here, it has been identified
that the clients were eligible for a rebate in the Roundup rebate program of Monsanto
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Company if they could able to achieve a specified objective.
2. The SEC investigation found insufficient internal accounting controls for Monsanto
Company. It has been found that the company was under great pressure as many competitors
started selling generic brands that are very similar to Roundup and Monsanto’s price, which
has created a significant loss for the company in the market share. At this time, the company
started focusing on a substantial amount of revenue to incentivize sales through the rebate
programs, but it could not manage it and failed to determine the cost of the program. Here, I
would like to characterize the situation of Monsanto Company as an accounting failure as the
accountant failed to record all the details about the cost. A material deficiency has been
identified in the accounting system or practices in the company that has resulted in
accounting failure.
3. The commission considered remedial acts that were undertaken by Monsanto
Company in order to accept the offer. The ethics and compliance requirements were to retain
independent and qualified ethics and compliances consultant who can able to conduct the
program assessment of crop protection business; analyze the desired effects and successful
implementation of ethics and compliance program assessment of crop protection business,
and the consultant will be responsible for assessing and evaluating the effectiveness and
success of financial reporting policies and procedures, and the internal accounting controls. I
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believe such kind of change is required for most companies that are experiencing financial
fraud and facing loss in their business. The consultation will help to enhance the performance
of the business by following the desired effects and successful implementation of the ethics
and compliance program. I believe the ethical and compliances requirement of Monsanto can
bring change in the culture of a global company in a proper ethical way.
4. A restatement of the financial statement of the company means the act of revising the
previous financial statement to make correct a mistake or an error. In the present context of
Monsanto company, it is essential that the financial statement must be audited by a different
organization so that the same mistake cannot be repeated again. I do believe that restated
financial statement of the company must be audited by a different organization as they can
promptly focus on the major issues in the previous accounting and try to rectify those
mistakes or errors. If looking into the cost and benefit factors, a different firm can provide
better financial information based on audited financial statements. After the investigation, the
company could able to pay more attention to three years of financial reports and use effective
strategies to gain more benefits in upcoming years.
