rsm220 case draft

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Rotman Commerce
Dragon Stojanovic

To CFO From Company Controller Date November 4 2010 Subject LumberSell Limited LSL Financial Reporting IssuesFiscal Year 2010This memo discusses how certain issues faced by LSL will impact its financial statements and concludes on how they should be treated under accounting methodsThe company will be reporting under IFRS for the first time this year Being the companys controller it is my job to properly manage financial reports in accordance to the new guidelines so their users can make wellinformed decisions In this case users include the bank representatives To allow for an increase in the line of credit the representatives would want LSL to have favourable liquidity ratios For this reason we want the companys liabilities for the year to be minimizedIssue1 Accounting for Royalty Payment After signing a licensing agreement with Bowman Inc BI LSL has earned exclusive sales and distribution rights for BIs products But in return it has to pay royalty fees to BI as a percentage of sales In case of no sales a minimum fee of 350000 must be paidAccording to CI
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