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Pepsico, Inc. spanned more than 190 countries and accounted for approximately one-quarter of the world's soft drinks. The vice president of finance for Pepsico East Asia had been collecting data on the firm's proposed equity joint venture in Changchun, People's Republic of China (PRC). Although Pepsico was already involved in seven joint ventures in the PRC, this proposal would be one of the first two green-field equity joint ventures with Pepsico control over both the board and day-to-day management. Every investment project at Pepsico had to go through a systematic evaluation process that involved using capital budgeting tools, such as new present value and internal rate of return. The vice president of finance needed to decide whether the proposed Changchun joint venture would meet Pepsico's required return on investment. He was also concerned what the local partners would think of the project. The final decision would be made after a presentation to the president of Pepsico Asia-Pacific.

The vice president, finance must quickly address several choices concerning a proposed office relocation. His analysis will likely include discounted cash flow analysis (DCF) and the topics of capital asset pooling and tax benefits. The case compares and contrasts the concepts of DCF and net present value analysis with Seagram's version of EVA (Economic Value Added). The case also provides a unique Asian focus for this type of decision. Office space location and the rent vs. buy option are extremely important decisions faced by a multitude of managers in Hong Kong. The traditional wisdom in Hong Kong has been that buying property was more efficient - especially given the phenomenal appreciation of property values. However, it can serve to distract a firm from its' core competencies and tie up working capital in non-producing assets. Finally, the case also provides a brief overview of capital asset pooling and depreciation tax law in Hong Kong. While the discussion is brief, it nevertheless provides an adequate first step towards further study in this area. Students from other areas of the world will also be interested in examining the differences between their country's tax laws and Hong Kong's.

Several large Canadian public companies announced their intent to merge and use the pooling of interests method rather than the traditional purchase method. Pooling had been rarely used to account for business combinations in Canada. The case focus is on an analyst who wanted to ensure that she understood the differential impact of both methods so that she could more fully represent her clients' interests. She decided to use an analysis of the recent merger of TransCanada Pipelines and NOVA Corporation to help her better understand and evaluate the two alternative accounting methods and their impact on the financial statements.

Several large Canadian public companies announced their intent to merge and use the "pooling of interests" method rather than the traditional "purchase method". Pooling had been rarely used to account for business combinations in Canada. The case focus is on an analyst who wanted to ensure that she understood the differential impact of both methods so that she could more fully represent her clients' interests. She decided to use an analysis of the recent merger of TransCanada Pipelines and NOVA Corporation to help her better understand and evaluate the two alternative accounting methods and their impact on the financial statements.

The vice-president of finance at Seagram Greater China was contemplating what actions to take in light of the proposed changes to the duty rates which applied to imported scotch and cognac in Taiwan. Given that the Taiwanese spirits market had become very competitive in recent years, careful management of the duty rate changes was critical for ensuring future market share and profitability in Taiwan. The task facing the decision maker was to determine what pricing levels to recommend for Seagram's scotch and cognac products based upon the proposed duty regime. The case is particularly suitable to managerial accounting classes intending to develop skills and application of contribution and margin analysis. The strong marketing linkages in the case also make it applicable to classes dealing with pricing in highly competitive markets.

A leading Canadian mining company had recently closed two uranium mines and begun the lengthy and complex regulatory process to obtain approval of their clean-up plans for the mine, surface facilities and waste management areas. The accounting issues in the case focus on the uncertainty associated with the approval of a specific waste management method, upon which the company had based its provisions for clean-up costs, and the potential cost associated with alternative waste management methods that had been investigated by an independent consultant. If forced to adopt one of the alternative methods, a potential cost and liability of $300 million could result. In the audit committee meeting a concern is raised about the potential existence of a contingent liability. The decision faced by the audit committee is whether to investigate the situation, and if so, its role and how to proceed. (Two sequels to this case, titled Northern Mines Limited (B), case 9A98B013 and Northern Mines Limited (C), case 9A98B014 describe the audit committee's investigation and recommendations.)

A leading Canadian mining company had recently closed two uranium mines and begun the lengthy and complex regulatory process to obtain approval of their clean-up plans for the mine, surface facilities and waste management areas. Northern Mines (B) summarizes the investigation that was carried out by the audit committee, and the information that is gathered from the auditors and management about the regulatory process for decommissioning and the company's proposed clean-up methods. Now the audit committee members must decide if a contingent liability exists, and if so, what to recommend to the board about disclosure. (This is a sequel to Northern Mines Limited (A), case 9A98B012.)

Group Retirement Services (GRS) is a division of London Life Insurance Company in London, Ontario. The vice president of GRS implemented the balanced scorecard in his division in 1994. Since that time, the industry and London Life have experienced significant change. Although the scorecard was not yet complete (after three years), the real issue here is whether the scorecard has been useful to GRS and whether the scorecard could be improved to assist the department in the future.

Group Retirement Services (GRS) is a division of London Life Insurance Co. of London, Ontario. The vice president of GRS implemented the balanced scorecard in his division in 1994. Since that time, the industry and London Life have experienced significant change. Although the scorecard was not yet complete (after three years), the real issues here are whether the scorecard has been useful to GRS and whether the scorecard could be improved to assist the department in the future.

After a turbulent year in the Canadian airline industry, Madelaine Mercier wants to reevaluate her investment in Air Canada and Canadian Airlines. She is wondering how she should reflect the extensive amount of leases used by the two companies in her analysis. She is unsure if she should make adjustments to the company's financial statements and is curious to know whether these adjustments would make a material difference in her analysis.

A new pharmacy owner seeks advice on her financial position and operating results.

A heavy equipment manufacturing firm is considering three different levels of investment in a professional services firm that performs consulting engineering work for industrial firms. To assess the impact of the different levels of investment, financial statements need to be prepared using generally accepted accounting principles (GAAP), for one year after the planned investment.

A consultant wasn't convinced that all relevant items, for example, leading and lagging indicators, were either currently being identified and measured, or would continue to be in the future. That is, he questioned whether the company was adequately following a strategic approach to measurement. At the same time, he wondered what changes were necessary to effectively implement such an approach.

Minnova Lac Shortt mine faces an important capital budgeting decision. A discounted cashflow analysis of a $19 million investment to deepen the existing mine by 300 metres is required. Given the high levels of uncertainty and flux in the external environment (e.g., U.S. exchange rate, price of gold, head grade of ore, recovery percentage, etc), managers need to conduct a sensitivity analysis. Qualitatively, Minnova's mining strategy weighs heavily on the decision because the quantitative analysis results in a slightly negative net present value.

An auditor is planning the audit of a new client, Acme Hardware. For preparing the audit plan, he becomes aware of the possibility that certain managers might be using accounting flexibility to aid them in qualifying for incentive bonuses based on profitability. The areas are inventory and advertising. The auditor must decide what action, if any, to take.

Arbor Capital must choose a method of revenue recognition in the pre-need funeral and cemetery services industry. Since three accounting firms expressed differing opinions on the type of revenue recognition method Arbor should employ, the student must examine the complexity of revenue recognition and the alternatives available to Arbor for recognizing revenue. The case allows the student to determine the effect the alternatives have on the financial statements and the actual economic impact which results from these changes. As an outside director of Arbor's Audit Committee, the student is expected to make a recommendation to Arbor's Board of Directors.

This note focuses on the decision rules and guidelines managers use in recognizing revenue and measuring income in the preparation of periodic financial statements. This note considers issues only partly considered by the Canadian Institute of Chartered Accountants and the Financial Accounting Standards Board in the United States.

This note focuses on the decision rules and guidelines managers use in recognizing revenue and measuring income in the preparation of periodic financial statements. This note considers issues only partly considered by the Canadian Institute of Chartered Accountants and the Financial Accounting Standards Board in the United States.