In 2021, an investment management firm analyst needed to convince his portfolio manager that technology companies such as Amazon.com Inc. (Amazon) could have a strong investment thesis since they improved upon existing business models. To make his argument, he used financial ratio analysis to compare one of the portfolio manager's favourite companies, Walmart Inc. (Walmart), with a more technologically focused competitor in the retail space, Amazon. By analyzing the two companies using ratio analysis to highlight their similarities, the analyst sought to show his portfolio manager that Amazon was not only a technology company, but a better version of Walmart.
In 2021, an investment management firm analyst needed to convince his portfolio manager that technology companies such as Amazon.com Inc. (Amazon) could have a strong investment thesis since they improved upon existing business models. To make his argument, he used financial ratio analysis to compare one of the portfolio manager's favourite companies, Walmart Inc. (Walmart), with a more technologically focused competitor in the retail space, Amazon. By analyzing the two companies using ratio analysis to highlight their similarities, the analyst sought to show his portfolio manager that Amazon was not only a technology company, but a better version of Walmart.
In August 2021, the co-owner of the property management and rental business Nassau Property Partnership, located in London, Ontario, asked his brother, a senior partner in a tax firm, for help with the tax structure of various operational and strategic decisions, both for his business and personal affairs. The business managed well over the COVID-19 pandemic, but several recent major events required advice from an experienced tax professional. Regarding his personal life, the co-owner was considering retiring from his company, which was a partnership, and had already put down a deposit on a second home in Florida. He wanted to fund the remaining part of the purchase through either a sale of his business interests to his daughter or through the sale of his family cottage. However, both of these decisions may have repercussions.
In August 2021, the co-owner of the property management and rental business Nassau Property Partnership, located in London, Ontario, asked his brother, a senior partner in a tax firm, for help with the tax structure of various operational and strategic decisions, both for his business and personal affairs. The business managed well over the COVID-19 pandemic, but several recent major events required advice from an experienced tax professional. Regarding his personal life, the co-owner was considering retiring from his company, which was a partnership, and had already put down a deposit on a second home in Florida. He wanted to fund the remaining part of the purchase through either a sale of his business interests to his daughter or through the sale of his family cottage. However, both of these decisions may have repercussions.
In January 2021, the co-founder of Mystery Books Co. (Mystery Books) was evaluating the company’s 2020 performance under the leadership of his daughter as the new chief executive officer. His daughter had ambitions of securing Walmart Inc. as a key client, so the co-founder had promised her an additional performance bonus of 5 per cent of his 30 per cent ownership of common stock if she grew the company’s net income by 20 per cent over the previous year. Throughout his thirty years of managing the company as chief executive officer, the co-founder had maintained very conservative accounting policies, some of which had been modified under his daughter's management. After reviewing the 2020 financial information, the co-founder harboured several concerns: Should he have specified more conditions for his daughter's performance incentive? Would the accounting policy changes pass the scrutiny of the company’s external auditors? And how should he proceed with regard to the suspicious sales activity he noticed? With these questions at the front of his mind, the co-founder of Mystery Books thought that perhaps he should have somehow left more reporting guidance for the company prior to leaving.
In January 2021, the co-founder of Mystery Books Co. (Mystery Books) was evaluating the company's 2020 performance under the leadership of his daughter as the new chief executive officer. His daughter had ambitions of securing Walmart Inc. as a key client, so the co-founder had promised her an additional performance bonus of 5 per cent of his 30 per cent ownership of common stock if she grew the company's net income by 20 per cent over the previous year. Throughout his thirty years of managing the company as chief executive officer, the co-founder had maintained very conservative accounting policies, some of which had been modified under his daughter's management. After reviewing the 2020 financial information, the co-founder harboured several concerns: Should he have specified more conditions for his daughter's performance incentive? Would the accounting policy changes pass the scrutiny of the company's external auditors? And how should he proceed with regard to the suspicious sales activity he noticed? With these questions at the front of his mind, the co-founder of Mystery Books thought that perhaps he should have somehow left more reporting guidance for the company prior to leaving.
In May 2021, a recent graduate from the master of business administration program at Ivey Business School noticed a news article about one of his investments, the leading athletic apparel company Under Armour, Inc. The article stated that Under Armour, Inc. was fined US$9 Million by the US Security and Exchange Commission. The charges were a result of concerns over the company’s revenue reporting practices, but the company's share price dropped only very slightly following the announcement. The investor was considering his options regarding his investment. However, he was still curious and eager to learn more about the circumstances behind the US Security and Exchange Commission’s charge and potential consequences for the company. The investor decided to examine Under Armour, Inc.’s revenue reporting practices, financial reporting practices, and corporate governance issues.
In May 2021, a recent graduate from the master of business administration program at Ivey Business School noticed a news article about one of his investments, the leading athletic apparel company Under Armour, Inc. The article stated that Under Armour, Inc. was fined US$9 Million by the US Security and Exchange Commission. The charges were a result of concerns over the company's revenue reporting practices, but the company's share price dropped only very slightly following the announcement. The investor was considering his options regarding his investment. However, he was still curious and eager to learn more about the circumstances behind the US Security and Exchange Commission's charge and potential consequences for the company. The investor decided to examine Under Armour, Inc.'s revenue reporting practices, financial reporting practices, and corporate governance issues.
In early 2020, a recent graduate from a prestigious masters of business administration program was working as a financial accountant for a renowned private equity firm in Glasgow, Scotland. For her father’s retirement, she was considering a gift from Highland Malt Inc.. The company’s Scotch whisky was offered in a limited quantity and promoted as an investment opportunity. Unlike ordinary bottled whiskies, Highland Malt Inc. sold this new line solely by the barrel. Collectors had to pay the full amount of CA$10,000 upfront, but could request a full refund within 180 days if unsatisfied with the product. The refund period allowed the collector to visit the distillery and inspect the purchase to ensure it met all expectations. The accountant was wondering if she should proceed with her plan to buy a barrel of Highland whisky as an investment and collector’s item for her father.
In October 2001, the co-founder and vice-president of Veritas Investment Research Corporation (Veritas), was considering his next steps as he prepared to issue a highly critical report on Bombardier Inc. (Bombardier). The vice-president believed that Bombardier had relied upon accounting innovations rather than operating innovations in order to report accounting profits. While numerous issues concerned the vice-president, one of the most critical was the way the company had managed the relationships between its various operating segments. These issues had developed over recent years and threatened to increase following the business decisions in the wake of September 11, 2001, which had dramatically affected the sale of aircraft. The vice-president's investment report would have significant consequences for numerous stakeholders and would affect both his own and Veritas's reputations. How should Veritas interpret the various issues related to Bombardier's accounting and reporting choices?
In October 2001, the co-founder and vice-president of Veritas Investment Research Corporation (Veritas), was considering his next steps as he prepared to issue a highly critical report on Bombardier Inc. (Bombardier). The vice-president believed that Bombardier had relied upon accounting innovations rather than operating innovations in order to report accounting profits. While numerous issues concerned the vice-president, one of the most critical was the way the company had managed the relationships between its various operating segments. These issues had developed over recent years and threatened to increase following the business decisions in the wake of September 11, 2001, which had dramatically affected the sale of aircraft. The vice-president’s investment report would have significant consequences for numerous stakeholders and would affect both his own and Veritas’s reputations. How should Veritas interpret the various issues related to Bombardier’s accounting and reporting choices?
In early 2020, a recent graduate from a prestigious masters of business administration program was working as a financial accountant for a renowned private equity firm in Glasgow, Scotland. For her father's retirement, she was considering a gift from Highland Malt Inc.. The company's Scotch whisky was offered in a limited quantity and promoted as an investment opportunity. Unlike ordinary bottled whiskies, Highland Malt Inc. sold this new line solely by the barrel. Collectors had to pay the full amount of CA$10,000 upfront, but could request a full refund within 180 days if unsatisfied with the product. The refund period allowed the collector to visit the distillery and inspect the purchase to ensure it met all expectations. The accountant was wondering if she should proceed with her plan to buy a barrel of Highland whisky as an investment and collector's item for her father.
In October 2017, the managing director at Ohtani Capital faced a critical decision—should the company divest its long-term investment in Toshiba Corporation (Toshiba)? Recent events surrounding Toshiba's disagreement with its auditor over how to best report the writedown of its US nuclear power unit (Westinghouse Electric Co. LLC) had negatively impacted the company’s profitability and internal management, leading to the company’s possible delisting from the Tokyo Stock Exchange. The managing director needed to decide if Toshiba could overcome its difficulties, improve its internal management, and return to profitability, which would then enable the company to secure the necessary emergency funding to survive.
In October 2017, the managing director at Ohtani Capital faced a critical decision-should the company divest its long-term investment in Toshiba Corporation (Toshiba)? Recent events surrounding Toshiba's disagreement with its auditor over how to best report the writedown of its US nuclear power unit (Westinghouse Electric Co. LLC) had negatively impacted the company's profitability and internal management, leading to the company's possible delisting from the Tokyo Stock Exchange. The managing director needed to decide if Toshiba could overcome its difficulties, improve its internal management, and return to profitability, which would then enable the company to secure the necessary emergency funding to survive.
This case depicts a financial analyst trying to make sense of Starbucks' finances and drawing from recent projects of the IASB and FASB to identify lease accounting as a key issue for the firm. The case underscores the importance of having a full picture of a company's obligations in order to understand its overall performance. In reviewing the case, students examine Starbucks' extensive use of leases and use spreadsheet tools to understand the full extent of the corporation's indebtedness. Although heavy users of leases such as Starbucks have argued that lease accounting is complex, an estimation of lease indebtedness can be made using relatively simple tools that are easy for students to understand. The case allows issues of high-level accounting standards to be elucidated, using a well-known company with which students identify. The case illustrates the real-world consequences of accounting policy choices.
The Coca-Cola Company, founded in Atlanta, Georgia, in 1886, is an iconic American company that sells its products around the world. As the business and financial reporting context has changed over the decades, the company’s financial disclosure practices have also evolved—from its first, two-page, public annual report in 1920 to present-day annual reports that extend to over 150 pages. This note introduces corporate disclosure and the expansion of such disclosures over time. To aid the discussion and contextualize the evolution of corporate disclosure, the note also presents a short history of the Coca-Cola Company and securities legislation in the United States.
The Coca-Cola Company, founded in Atlanta, Georgia, in 1886, is an iconic American company that sells its products around the world. As the business and financial reporting context has changed over the decades, the company's financial disclosure practices have also evolved-from its first, two-page, public annual report in 1920 to present-day annual reports that extend to over 150 pages. This note introduces corporate disclosure and the expansion of such disclosures over time. To aid the discussion and contextualize the evolution of corporate disclosure, the note also presents a short history of the Coca-Cola Company and securities legislation in the United States.
In March 2018, an analyst at an investment management firm in Toronto, Ontario, had to decide whether or not to recommend that his firm establish a position in shares of Restaurant Brands International Inc. (RBI). Formed after the merger of Burger King and Tim Hortons Inc., RBI was led by the private equity firm 3G Capital. RBI was a powerhouse–the third-largest, quick-service restaurant chain in the world. Although RBI was performing well and seemed to present an attractive investment opportunity, the company was facing issues from disgruntled franchisees, who were dissatisfied with the cost-cutting measures implemented at Tim Hortons Inc. as part of 3G Capital’s acquisition. This led to class action lawsuits from franchisees as well as a business slow-down, as measured by same-store sales figures. With not much time left, the analyst had to determine and present a decision to the rest of his team on whether or not to invest in RBI.