Week 3 Assignment 3 Masimo Corporation uses a two year format on the balance sheets, however uses a three year format on the income statement. Masimo also utilizes a three year format in both equity and cash flow financial statements. Over the last three years Masimo has seen an increase in product revenue of more than 23% but has also experienced a decrease in royalty revenue by 42% since 2011. The income statement also shows a higher cost of production over a three year period. In 2011 the cost of goods sold was represented by 33%, however, two years later, the same cost of goods sold was 35% of revenue. Through the purchase of Spire Semiconductor, Masimo expects to see better production costs in the future. As is often the case with medical technology, Masimo has chosen not to express future expectations; “We believe that our core signal processing and sensor technologies are widely applicable and may develop and launch future applications utilizing our proprietary technology platforms. However, we do not plan to communicate the priority, status or timing of future measurements in development until such time that they have reached feasibility and/or received regulatory clearance” (SEC.gov, 2012).
Inventories are listed at the lower of cost or market. Masimo utilizes the FIFO method (first in, first out) and includes material, labor and overhead. While revenue recognition is standard, meaning that it is recognized as goods or services are delivered, in accordance with ASU 2009-13 which prohibit companies from accelerating revenue for reporting purposes, Masimo is also required to use a separate revenue recognition method attributable to multiple deliverables (SEC.gov, 2012).
As of December 29, 2012, the company had a checking account with a balance of $38 million. Additionally, the Company had cash equivalents of $33.6 million, consisting of $32.0 million