Case | HBS Case Collection | January 2013 (Revised August 2013)

First Solar: CFRA's Accounting Quality Concerns

by Suraj Srinivasan and Ian McKown Cornell


The case relates to accounting quality analysis conducted by the leading research firm Center for Financial Research and Analysis (CFRA) on companies in the solar industry with a focus on First Solar Inc. In 2009, CFRA was concerned that First Solar, like much of the solar industry, was facing deterioration in business prospects and exposed to risks arising from revenue recognition, high inventory levels, lack of customer and geographic diversification, aggressive warranty policies, excessive production capacity growth, and supply chain risks. The case places students in the shoes of CFRA analysts who need to assess First Solar's accounting quality and business prospects after the company releases its second quarter financial numbers in 2009. The case provides students with background information on the solar power industry, First Solar, data from CFRA research, and First Solar's quarterly reports and the earnings conference call to analyze and draw conclusions about First Solar's accounting practices and strength as a company. Students have to decide whether CFRA should flag First Solar as a concern and add it to CFRA's "Biggest Concerns" list. Order:

Keywords: accounting; accounting quality; earnings management; Financial Accounting; financial statement analysis; financial statements; accounting fraud; accounting red flags; accounting scandal; valuation; Risk and Uncertainty; Quality; Earnings Management; Valuation; Crime and Corruption; Financial Statements; Energy Sources; Green Technology Industry; Accounting Industry; Energy Industry;


Srinivasan, Suraj, and Ian McKown Cornell. "First Solar: CFRA's Accounting Quality Concerns." Harvard Business School Case 113-044, January 2013. (Revised August 2013.)