Canopy Growth Corporation: Accounting Problems in the Cannabis Industry?

In November 2019, John Fowler, founder and principle of consulting firm Blaise Ventures (Blaise) had been listening to a conference call where the management of Canopy Growth Corporation (Canopy) had reported its financial results for its second quarter ended September 30, 2019. Cannabis companies faced a wide array of complex financial reporting issues, and Fowler felt that being able to understand these issues and explain them to clients was critical to Blaise’s success. Armed with Canopy’s second quarter financial statements and select financial statement note disclosures, he set out to analyze the issues present in the company’s most recent results.

This case is suitable for an undergraduate- or graduate-level course in financial accounting or financial analysis. It is likely not suitable as an introductory case due to several areas of focus being at an intermediate level. After working through the case and assignment questions, students will be able to:<ul><li>examine the impact of the accounting standard “IAS 41—Agriculture” on a set of financial statements;</li><li>examine various inventory and revenue recognition issues such as returns, exchanges, and obsolescence, along with their associated impact on a set of financial statements; </li><li>analyze various other complex financial accounting issues including goodwill, intangible assets, equity method investments, financial instruments, share-based compensation, warrants, and impairment of assets; </li><li>analyze a complex set of financial statements and arrive at a conclusion regarding the financial health of the company; and </li><li>discuss business strategies for competing in the dynamic landscape of the Canadian cannabis industry.</li></ul>

• biological assets
• agriculture
• asset impairments
• acquisitions
• accounting for derivatives