...Part 1: Asset Group An asset group is the unit of accounting for a long-lived asset or assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. https://asc.fasb.org/glossarysection&trid=2155835&id=SL2269348-110220 05-3 Property, plant, and equipment typically consist of long-lived tangible assets used to create and distribute an entity's products and services and include: * a. Land and land improvements * b. Buildings * c. Machinery and equipment * d. Furniture and fixtures. 05-6 This Subsection provides guidance that focuses on developing estimates of future cash flows used to test for recoverability, including the: * a. Cash flow estimation approach * b. Cash flow estimation period * c. Types of asset-related expenditures that should be considered in developing estimates of future cash flows. Transactions 15-4 The guidance in the Impairment or Disposal of Long-Lived Assets Subsections applies to the following transactions and activities: * a. Except as indicated in (b) and the following paragraph, all of the transactions and activities related to recognized long-lived assets of an entity to be held and used or to be disposed of, including: * 1. Capital leases of lessees * 2. Long-lived assets of lessors subject to operating leases * 3. Proved...
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...which are covered by Accounting Standard 9 on revenue recognition; (b) Operating or finance leases; (c) Investments of retirement benefit plans and life insurance enterprises; (d) Mutual funds and venture capital funds and/or the related asset management companies, banks and public financial institutions formed under a Central or State Government Act or so declared under the Companies Act, 1956. Definitions The following terms are used in this Standard with the meanings assigned: * Investments are assets held by an enterprise for earning income by way of dividends, interest, and rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held as stock-in-trade are not ‘investments’. * A current investment is an investment that is by its nature readily realizable and is intended to be held for not more than one year from the date on which such investment is made. * A long term investment is an investment other than a current investment. * An investment property is an investment in land or buildings that are not intended to be occupied substantially for use by, or in the operations of, the investing enterprise. * Fair value is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction. Under appropriate circumstances, market value or net realizable value provides an evidence of fair value....
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...19-31 (25–30 min.) Waiting times, manufacturing cycle times. 1a. Average waiting time for an order of Z39 1b. = + = 160 hours + 80 hours = 240 hours per order 2a. Average waiting time for Z39 and Y28 2b. = + = 330 hours + 80 hours = 410 hours = + = 330 hours + 20 hours = 350 hours 19-32 (60 min.) Waiting times, relevant revenues, and relevant costs (continuation of 19-31). Selling price per order of Y28, which has an average manufacturing lead time of more than 320 hours $ 6,000 Variable cost per order 5,000 Additional contribution per order of Y28 $ 1,000 Multiply by expected number of orders × 25 Increase in expected contribution from Y28 $25,000 Expected loss in revenues and increase in costs from introducing Y28: Expected Loss in Expected Increase in Expected Loss in Revenues from Carrying Costs from Revenues Plus Increasing Average Increasing Average Expected Increases Manufacturing Cycle Manufacturing Cycle in Carrying Costs of Product Times for All Products Times for All Products Introducing Y28 (1) (2) (3) (4) = (2) + (3) Z39 $25,000.00a $6,375.00b $31,375.00 Y28 – 2,187.50c 2,187.50 ...
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...analyzed the working papers, and have submitted some supplementary information as requested. I understand that there are some questions as to why the information has been asked for in reference to the adjusting lower cost of market inventory valuation, capitalizing interest on building construction, the recording of gain or loss on asset disposal and the adjusting goodwill for impairment. I will be providing you with responses to your questions and have no doubt the answers will give you a better understanding on some of the accounting practices that may help increase the organization’s familiarity and practices from this analysis. Adjusting Lower Cost of Market Inventory on Valuation ARB No. 43 addresses the concern of inventory adjustments to lower of cost or market. GAAP maintains that the potential selling price will progress in the same direction and that probable future losses should be reported in the same period as the inventory decline. Companies should use the lower of cost or market method to value inventories. The AICPA has provided a definition to use in applying the LCM rule. As used in the phrase lower of cost market the term market means current replacement cost. Market should not exceed the net realizable value and market should not be less than net realizable value reduced by an allowance for an approximately normal margin (Schroeder, Clark, & Cathey, 2011). Using the LCM rule for inventories is uniform with the qualitative characteristics of accounting...
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...building construction. 3. Recording gain or loss on asset disposal. 4. Adjusting goodwill for impairment. Adjusting lower cost or market inventory on valuation The term “inventory” applied to all the goods/materials that are acquired with the intention to resale to make profits, which includes: * “Are held for sale in ordinary course of business. * Are in process of production for such sales, or * Are to be currently consumed in the production of goods or services to be available for sale” (Schroeder, Clark, & Cathey, 2011, p. 264). Inventory physical count can be determined by using periodic or perpetual inventory system. The valuation of inventory is of significant importance for multiple reasons. First ending inventory constitutes major part in current assets and have substantial impact on working capital of the organization. Second, inventory value has direct impact on the net profits of the organization. There are several methods available in US Generally Accepted Accounting Principle (GAAP) for valuation of inventories, such as FIFO, LIFO, Average inventory and Lower of cost or market. Lower of cost or market (LCM) valuation method based on the accounting constraint of conservatism, which means that best choice among accounting alternative is the method that would least likely to overstate assets and net income. LCM defined as “As used in the phrase lower of cost or market, the term market means current replacement cost (by purchase or reproduction...
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... 1 II. Table of Contents 2 III. Introduction 3 IV. The Coca-Cola Company History 4 V. Property, Plant, and Equipment 5 VI. Disposition and Exchanges of Property, Plant, and Equipment 5 VII. Impairment of Intangible Assets/Goodwill 6 VIII. Depreciation Method 7 IX. Contingent Liabilities 7 & 8 X. Tax Return 8 XI. Long-Term Debt 9 XII. Current/Long-Term Liabilities/ Interest Expense 10 XIII. Conclusion 11 XIV. Photos 12 XV. References 13 Introduction The Coca-Cola Company is a big company and it is a publicly traded company in which from my point of view...
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...Company introduction Engro Corporation Limited (the Company), is a public listed company incorporated in Pakistan under the Companies Ordinance, 1984 and its shares are quoted on Karachi, Lahore and Islamabad stock exchanges of Pakistan. Engro Corporation is one of the Pakistan’s largest conglomerates with a large business portfolio. Business portfolio Its business portfolio includes Engro fertilizers, engro foods, engro polymer, engro Eximp (agriproducts), engro powergen, Sindh engro coal mining company and engro vopak. Registered office 7th & 8th Floors, The Harbor Front Building, HC # 3, Marine Drive, Block 4, Clifton, Karachi-75600, Pakistan Tel: +92(21) 35297501 – 35297510 Fax:+92(21) 35810669 E-mail: info@engro.com Website: www.engro.com Board of Directors 1. Hussain Dawoo 2. Shahzada Dawood 3. Shabbir Hashmi 4. Khawaja Iqbal Hassan 5. Frank Murray Jones 6. Ruhail Mohammed 7. Shahid Hamid Pracha 8. Saad Raja 9. Sarfaraz A Rehman 10. Khalid S. Subhani Vision To be the premier Pakistani enterprise with a global reach passionately pursuing value creation for all stakeholders. Analysis on the financial statements An analysis on the different financial statements of the company is given below. Income statement Income statement of engro corporations reveal that the consolidated net income (Profit After Tax) earned Rs.7, 801 million in 2014, which is (6%) less than that of the income...
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...which had affected Star Cruises, as well as the deemed disposal of the Norwegian Cruise Line Corporation Ltd (NCLC), where NCLC ceased to be a subsidiary of the Company and became a jointly controlled entity of the Company. Star Cruises’ financial performance was poor, as reflected in the financial statements. Gross profit for the company (Star Cruises without its subsidiaries) recognized a 25.86% decline. However, while profitability ratios such as Return on Assets (ROA) and Return on Equity (ROE) improved from last year; it is good to note that they are still a negative ratio. Although the improvement on face value may seem good when compared to its competitors, it is unfair to judge the value as Star Cruise made an overall loss and its absolute ROA and ROE are bad compared to its competitors. Overall, Star Cruises recorded a -20% change in her total assets, and was most salient compared to her other competitors which recorded an increase of either 10% or a fall of 2%. However, Star Cruises’ current assets had increased by a significant 118.79% in the year 2008. This increase in current assets is possible due to a much more significant increase of 34580.65% in her ‘other current assets’ account, which more than offsets a dip in other accounts such as cash & short term investments, net receivables, inventory, which is a result of NCLC becoming a jointly controlled entity instead. In fact, 50% of all of NCLC’s assets now belong to Apollo. Similarly for the total change...
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...provided, I concluded that additional information was needed. I was informed that you were questioning my request for more information on the following topics: adjusting lower cost of market inventory on valuation, the capitalizing interest on building construction, the recording of gains or losses on asset disposal, and the adjusting goodwill for impairment. By referencing the accounting principles and practices, I hope that you and your company will have better insight of my analysis of this project. In regards to adjusting lower cost or market inventory on valuation, Accounting Research Bulletin No. 43 outlines it meaning. Depending on the quality and framework of the inventory, the rule of cost or market, whichever is lower, can be applied either directly to each item or to the total of the inventory. The method chosen should be the one that most clearly reflects periodic income (ARB No. 43, 1953). Inventory valuation has a direct effect on the final results of income. The smallest adjustment to inventory will cause the same amount of change in your reported income. Because I make every effort to present financial data objectively, I prefer not to overstate your assets and income. Concerning your inventory, it needs to be determined if there is a sure timeframe as to when and if the inventory will be sold. Due to this uncertainty, the inventory should be evaluated at lower of cost or market. What this means is that if your inventory is represented on the accounting records...
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...Client Understanding I am excited to be working with your organization to improve the financial practices. After reviewing the firm’s financial records there are a few additional items needed to complete the accounting evaluations. The additional items being requested are adjusting lower cost of market inventory, recording gain or loss on assets, adjusting goodwill and capitalizing interest on building construction. I understand the firm is concern with why the additional information is being requested. Each requested item will be discussed in detail to ensure the organization understands how these accounting practices will improve the entire firm. Adjusting lower cost of market inventory on valuation Originally the lower of cost or market (LCM) method, was defined by reporting only downward adjustments in the value of temporary investments (Schroeder, Clark, & Cathey, 2011). Ending inventory is stated as the historical cost, which can be higher than the cost of replenishing inventory. The higher historical cost will be reported on the balance sheet. In this case the cost is reported as the current market value (Elmaleh, 2007). This concept is relevant because the higher cost is reported as a loss and a decrease in the cost of goods sold. Selling inventory will require the firm to record several transactions that will create cost and adjusting entries. “GAAP requires that inventory must be carried on the books and reflected on the balance sheet at the lower of cost or...
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...Introduction to Fertilizer Industry of Pakistan Over the years, Pakistan’s economy has been heavily dependent on agricultural segment. It is considered to be the backbone of economy as it supports high percentage of GDP among other sectors, generating massive inputs for the agro based industry. During Fiscal year 2011, agricultural sector growth rate was 1.2% which supported huge sectors of economy like manufacturing, exports etc, which in turn resulted in increased consumption and has continued its growth rate at an exponential rate. The fertilizer sector is one of the important sectors as it is a provider of raw materials to different industries, contributing heavily to Pakistan’s export. On the contrary, it is also a large market for agro products such as pesticides, farm implements and fertilizers. It also contributes to agro based industries consisting of textiles, food, sugar etc. Due to significance of this sector, the government ensures that it always maintain consistent and transparent policies related to investments, prices and supply/demand of products and materials. When it comes to distribution of natural resources to industries, fertilizer industry tops the list for rationing of resources such as gas and water. Introduction to Engro Corporation Ltd Engro Corporation is a public listed multinational organization based in Karachi. The company portfolio is composed of six subsidiaries involved in production of different products including Fertilizers, food...
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...Finance For Managers Contents Introduction 3 General description of the firm and its industrial sector 3 Vodafone Statements 4 Income Statement: 4 Analysis for the consolidated income statement: 4 Revenue: 4 Share of result in associated: 4 Impairment Losses: 5 Other income and expenses: 5 Income Tax Expenses: 5 Earnings per share: 6 Consolidated statement of financial position: 6 Further Analysis: 8 Assets: 8 Goodwill and other intangible assets: 8 Property, Plant and Equipment: 8 Investments in Associates: 8 Other non-current assets: 8 Current Assets: 9 Total equity and liabilities: 9 Total equity: 9 Borrowing: 9 Taxation liabilities: 9 Consolidated statement of cash flow 9 Further Analysis: 10 Purchase of interest in subsidiaries and joint ventures, net of cash acquired: 10 Purchase of intangible assets: 11 Disposal of investments: 11 Purchase of investment: 11 Dividends received from associates: 11 Proceeds from issues of long term debt: 11 Purchase of treasury shares: 11 Profitability Ratio 11 Liquidity Ratio 13 Current Ration: 13 Quick Ratio: 13 Efficiency 13 Conclusion: 14 Reference: 14 Introduction The aim of this report is to evaluate the financial performance of Vodafone telecommunications company. To conduct benchmarking with several financial key figures in a changing business environment is difficult and time consuming for today’s managers and there exists a need for an easy and...
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...depletion (From Income Statement) + Decrease in CURRENT Asset accounts other than cash (calculate the difference between this period and last period from Balance Sheet) - Increase in CURRENT Asset accounts other than cash (calculate the difference between this period and last period from Balance Sheet) + Increase in CURRENT Liabilities accounts (calculate the difference between this period and last period from Balance Sheet) - Decrease in CURRENT Liabilities accounts (calculate the difference between this period and last period from Balance Sheet) + Loss on Disposal of PPE/Fixed Assets used in normal operations (From Income St.) - Gain on Disposal of PPE/Fixed Assets used in operations (From Income Statement) = cash provided by op. activities Cash provided by investing activities: - Increase in PPE and LONG-TERM Assets if paid cash (calculate the difference between this period and last period from Balance Sheet) + Decrease in PPE and LONG-TERM Assets if received cash (calculate the difference between this period and last period from Balance Sheet) - Increase in Investments Assets if paid cash (calculate the difference between this period and last period from Balance Sheet) + Decrease in Investments Assets if received cash (calculate the difference between this period and last period from Balance Sheet) = Cash provided by investing activities Cash provided by financing activities: + Increase in LONG-TERM Liabilities if received cash (calculate the difference...
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...Issues: * How should Home Computer classify the disposal of the assets of the video monitor operations? Explain. * Is the video monitor operations involved any impaired? Explain. * How should Home Computer classify the disposal of the assets of the printer operations? Explain * Is the printer operations involved any impaired? Explain. Analysis: Home Computer is a publicly held manufacturer and retailer of the computer and it has three business segments which are computer manufacturing, printer manufacturing and retail store distribution. However on February 3, 2002, Home Computer wanted to discontinue its video monitor operations at the Seattle and then establishment of a replacement facility in Sacramento. According to ASC 360-10-35-21(f); A long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable -- A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent. Since Home Computer wanted to move the video monitor operation to CA, the discontinue operation of the video monitor is satisfied to take the recoverability test and to see if any impairment occurs. According to ASC 360-10-35-17, impairment occurs when the sum of expected future...
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...creditor that receives long-lived assets that will be sold from a debtor in full satisfaction of a receivable shall account for those assets at their fair value less cost to sell, as that term is used in paragraph 360-10-35-43. The excess of the recorded investment in the receivable satisfied over the fair value of assets received (less cost to sell, if required above) is a loss that shall be recognized. For purposes of this paragraph, losses, to the extent they are not offset against allowances for uncollectible amounts or other valuation accounts, shall be included in measuring net income for the period. Recorded investment in the receivable is used in paragraphs 310-40-25-1 through 25-2; 310-40-35-7; 310-40-40-2 through 40-8; and 310-40-50-1 instead of carrying amount of the receivable because the latter is net of an allowance for estimated uncollectible amounts or other valuation account, if any, while the former is not. 310-10-35 Credit losses for loans and trade receivables, which may be for all or part of a particular loan or trade receivable, shall be deducted from the allowance. The related loan or trade receivable balance shall be charged off in the period in which the loans or trade receivables are deemed uncollectible. Recoveries of loans and trade receivables previously charged off shall be recorded when received. B. FASB: 845-10-05 In a barter transaction involving barter credits, an entity enters into a transaction to exchange a nonmonetary asset (for example, inventory)...
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