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Tokyo Afm

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TOKYO AFM Case Study

1. I would recommend to Matsumoto to change the way he recognized revenues by recognizing the revenues on a monthly basis for the period or straight-line method for the time of the contract. So for a five-year contract I would recognize 1/60th of the revenues each month for 60 months. So for this question I would recognize Y1,666.67 each month for 60 months. 2. I would recommend to Matsumoto to capitalize all acquisition costs incurred during the acquisition of the revenue. For this example I would capitalize Y70,000 for the two-year contract. I would amortize the acquisition cost for 24 months on a straight-line method. So I would recognize Y2,916.67 of expense every month for 24 months or the time period of the contract. 3. I would recommend to Matsumoto to do two things when recognizing respected losses associated with automobile insurance and catastrophes insurances:
Since its a high probability of occurrence and can be reliably estimated for automobile insurances I would recognize 70% of the premium as a liability on the balance sheet and disclose the reasons for the liability on the financial statement notes. Since probability of occurrence is only reasonable or amount cannot be estimated for the catastrophe insurance I would just disclose 12% OF premiums as liability or the scenario of 4% to 20% of premium payouts is likely in the financial state notes but do not accrue as a liability. 4. I would recommend to Matsumoto to record the historical cost of all long-term investment and for the reminder of the investment record the unrealized gain or loss on the balance sheet under the shareholders’ equity. Here is a how I would record the investment using the number from Exhibit 2. I am going to guess that 70% of the investments are long term and the other 30% as ready to be sold at anytime. Chart bellows show how they

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