RSM426H1 Lecture Notes - Lecture 7: Financial Statement Analysis, Revenue Recognition, Deferred Tax
14 Apr 2018
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Required report: proposed tpi purchase (user: peter norwood, abacass ltd president; needs: advice on appropriateness of investment decision) Strengths: synergies (author lists, publishing equipment, excess capacity. Loss of mr. gillis: ryan gillis unmotivated. Opportunities: mrs. gillis highly motivate to sell (bargain purchase) Threats: highly leveraged and losing money (p30&p32, government subsidy program discontinued. No(cid:396)(cid:449)ood"s o(cid:271)je(cid:272)ti(cid:448)es: wants growth, to pass on abacass to children, near retirements, needs income, conservative, wants low debt and risk. A(cid:271)a(cid:272)ass" csfs: mr. gillis impact on future performance, excess capacity and synergies, financing; currently has large d:e ratio. Accounting issues: financial statement analysis and gaap errors. Issue #1: revenue recognition: case fact: revenue recorded when orders placed, accounting treatment: record when risks and rewards transferred (ifrs 15. 31, effect on hook: overstatement of a/r for 2003. Issue #2: rr book return policy: unsold books returnable within 2 years. Alternative #2: revenue recorded only after 2-year period.
