Case Name :      Lehman Brothers’ Fall

Authors :           Ram Kumar Kakani, Vasudha Singhania, Martin Stack

Source :             Ivey Publishing

Case ID :            W12977

Discipline :        Accounting

Case Length :    12 pages

Solution Sample availability : YES

Plagiarism : NO (100% Original work)

This case unfolds the financial undertakings of Lehman Brothers Inc., which was once the fourth largest investment bank in the world. On September 15, 2008, less than a year after the bank presented its largest profit ever, the world saw it descending. In terms of size of assets, Lehman is considered the largest bankruptcy in history, with assets summing up to US$639 billion and liabilities of US$613 billion. The U.S. credit crisis uprooted the strength of Wall Street, with Lehman announcing a petition it filed under Chapter 11 of the U.S. bankruptcy code. The bankruptcy raised some interesting questions. The biggest among them being: How could a large-sized company such as Lehman with a track record of reporting huge profits, become so helpless that it had to file for bankruptcy?Undoubtedly, the financial scenario in the United States had become bad, especially for those companies that were into mortgage banking. Lehman had some additional drawbacks. This case tries to deal with a couple of such problems, one of them being the accountancy of its Repo 105 transactions. The modus operandi of the company has been unveiled to show how it managed to hide its true financial state by using gaps in the financial reporting system across the borders and remain clean handed for years