DiDi Global Inc. (滴滴出行) (NYSE: DIDIY) was a mobile transportation platform that monopolized the Chinese ride-hailing and taxi-hailing market having a user base of 550 million worldwide. On 16 June 2021, China's State Administration for Market Regulation (SAMR) launched an investigation of DiDi for unfair competitive practices and controlling pricing. DiDi's prospectus disclosed this but did not fully disclose the warning from the Cyberspace Administration of China (CAC) to postpone the listing for cybersecurity review and the risk involved from this noncompliance with information security. DiDi was listed on the NYSE on 30 June 2021, raising around USD4.4bn. Within nine days after the listing, CAC had banned all of DiDi's 25 ride-hailing apps from app stores over the mishandling of customer data and to safeguard national security. This led to a significant drop in DiDi's share price. On 16 July 2021, seven Chinese government departments, including those responsible for national security and cybersecurity, visited DiDi's office. Reports suggested that heavy fines, suspension of operations, and even delisting. As the largest shareholder with a 20.1% stake, how would the Chief Investment Officer of SoftBank's Vision Fund recommend to decrease risk exposure of its investment in DiDi?

The release of ChatGPT and other generative AI models marked the beginning of a revolution in various industries by automating work processes. These AI technologies, accessible through chatbot interfaces, could generate text, audio, code, images, and videos, saving time and resources. In 2023, generative AI was starting to transform the way professionals worked in the accounting industry, enabling them to streamline auditing and accounting processes, utilizing natural language processing (NLP), and improving information search. The big-four accounting firms invested heavily in developing their own AI solutions to enhance efficiency and offer innovative client solutions. However, in early 2023, some big-four offices restricted the use of generative AI models, while other firms embraced the technology, providing guidance and training to their staff. The rapid growth of generative AI posed challenges for businesses unprepared for automation, leading them to assess the risks and benefits before adopting AI. Joesy Loh, an audit partner at a Singaporean CPA firm serving SMEs, recognized the potential of generative AI to improve audit efficiency and financial statement preparation. How can Joesy persuade her partners to embrace generative AI technology, considering their concerns about the accuracy of the generated output and data security for their firm and clients?

The case introduces a due diligence approach that prompts students to identify red flags and suspicious transactions through a fictitious case based on real-life examples. Students take on the role of an investment team manager of a hedge fund in Hong Kong focusing on investing in both private and publicly traded companies with significant growth potential. When the COVID-19 pandemic heavily affected industries across most sectors, most industries went through a major reshuffling leaving surviving industry performers that would have a great potential to become leaders over time. As such, the Company had been actively seeking new potential investments and meeting with their management since the end of 2022, and identified a potential company (Genuine) in the emission testing equipment industry. Through this case, students gain foundational knowledge of due diligence and learn to identify red flags for suspicious transactions or situations. They apply their learning by creating a due diligence plan and evaluating the available information on Genuine and its market. This analysis allows students to further advance their understanding and ultimately come to an investment decision. As an intermediate- to advanced-level case, students are required to actively compare data from different sources and perform relevant calculations. This will enable them to process and derive further information essential for making informed investment decisions.

The Silicon Valley Bank of SVB Financial Group (NASDAQ: SIVB) supported tech startups and venture capital funds primarily in Silicon Valley. On 8 March 2023, the bank attempted to raise equity and sell debt securities to improve liquidity, but was unsuccessful. Doubts about the bank's solvency led its depositors to withdraw cash, totaling around USD42bn. On 10 March 2023, the US regulators shut down the bank and halted its shares from trading on NASDAQ. In 2021, SVB invested heavily in long-dated securities, such as mortgage bonds securities, and US treasury 10-year bonds to be held until maturity, thus classifying the majority of them as HTM. HTM securities were recorded at amortized cost, and changes in fair market value were only disclosed. After interest rate hikes starting at the end of March 2022, SVB disclosed unrealized loss on HTM securities, and on 31 December 2022, it was USD15.1bn, and total equity was USD16.3bn. Recording unrealized losses would force many US banks to incur significant losses, requiring replenishment of capital reserves. What approach should the board of the Financial Accounting Standards Board take to provide useful information to users of financial reports, and also balance the interests of the banking industry?

Rollins Inc., a listed pest control company on the New York Stock Exchange (NYSE: ROL), and former CFO, Paul Edward Northen, were charged by the Securities and Exchange Commission (SEC) with improper earnings management. The charges were based on the company's financial reporting between 2016 and 2018. The SEC alleged that Northen waited the preliminary earnings results were ready, and adjusted the company's accounting reserve accounts to align with the research analysts' consensus EPS estimates, without following U.S. Generally Accepted Accounting Principles (US GAAP), and failed to properly document the basis for his adjustments. Rollins was known for boasting about its EPS record. In late 2020, the SEC's Enforcement Division detected irregularities in the company's EPS results through data analytics. On 18 April 2022, the SEC found Rollins to have violated the Securities Exchange Act of 1934. Despite not admitting or denying the SEC's findings, Rollins and Northen agreed to pay civil penalties of USD8mn and USD100,000, and to stop any future violations of their previous misconduct. The SEC investigators, Carolyn Winters and Tonya Tullis, uncovered the series of Rollins' misconduct. What steps could they take to avoid similar situation for at Rollins and other U.S.- listed enterprises going forward?

Spreadsheet Supplement for Case HK1397

This case focuses on the customer loyalty program of Qutoutiao Inc. (QTT, NASDAQ: QTT). Financial analysis, unit economics, and accounting treatments will be explored in the case. QTT operated a mobile content platform, "Qutoutiao," in China, which literally meant "fun headlines" in Chinese. QTT aggregated mobile content from various sources and used AI-based algorithms to present customized content to users. The data analytics capabilities of the algorithms enabled QTT to analyze user data and customize feeds to users in order to generate more advertising revenue. In December 2019, Wolfpack Research (Wolfpack) published a report on QTT, casting serious doubts about the sustainability of its business model, in particular, the customer loyalty program. The program comprised "user engagement" and "user acquisition" activities that were found to be "extremely expensive." Days later, Wolfpack published a follow-up report extensively using unit economics to support its claims. Students will be asked to apply unit economics to analyzing QTT's operating and financial data. For financial analysis and forensic accounting purposes, students will also grapple with questions on how to substantiate the loyalty program expenses and liabilities, and to assess the financial implications of QTT's accounting treatment in recording the loyalty program expenses.

Spreadsheet Supplement for Case HK1387

This case is based on a hypothetical company that was newly established for a mobile gaming app. Before the company was incorporated, an experienced game developer and "creative strategist," Leon, and Lucas, a gaming influencer and streamer who was very popular in the Spanish-speaking world, had jointly created a game called sangre y acero®, meaning "Blood and Steel" in Spanish. Lucas's name on his streaming channel on Twitch and YouTube was Rey de Acero®, meaning "King of Steel" in Spanish. This game had passed most of the game-testing stages. A trademark had been obtained for the game's name and logo. A copyright was also obtained for the game's codes, art, music, scripts, and story and plot. These were the pre-incorporation events. Later, Leon and Lucas contributed their sangre y acero® trademark and this copyrighted game to the incorporation of the company. Their friends contributed funds. A new company, SYA Inc., was formed on 1 January 2022. On 1 July 2022, the app was fully launched. The purpose of the case is to have students prepare financial statements based on provided financial data, touching on a wide array of accounting concepts and common issues.

This case explores the accounting treatment of revenue recognition for a biopharmaceutical company in the life sciences sector, HUTCHMED (China) Limited (HCM, HKEx: 13, NASDAQ: HCM). As a subsidiary of CK Hutchison Holdings Limited (CK Hutchison, HKEx: 1), HCM operated to discover, develop, and commercialize "targeted therapies" and "immunotherapies" for the treatment of patients with cancer and immunological diseases. Founded in 2000, HCM was initially a pioneer in discovering drugs aimed at creating novel therapies in China. Over the past fifteen years, HCM had created numerous drug candidates. These successes in discovering drugs had led to some collaborations with leading global pharmaceutical companies such as AstraZeneca and Eli Lilly. Due to the business model of life science companies, commonly with the extensive use of license and collaborative arrangements with external parties, the accounting for revenue is particularly complex. Through the case, students will grapple with some practical questions. For instance, what were those specific traits as in HCM's business model? Upon identification of the traits, students will be asked about how each of these traits had impacted HCM's accounting policy on revenue recognition. In addition, what were the financial implications attributable to such accounting policy as adopted by HCM?

This case explores the accounting treatment for embedded derivatives of China Evergrande Group (HKEx: 3333). It had been the second-largest property developer in China by property sales and largest by land reserves and borrowing size. On 24 September 2020, a suspicious "letter" was widely circulated on the Internet. The stock price plunged. The "letter" was purportedly sent by Evergrande to the Chinese government, urging the approval of a "listing plan" which was crucial in the "reorganization plan" of the Group. Back in December 2016, Evergrande used this plan to attract new "strategic investors" (SIs) to inject capital. To attract SIs, Evergrande and the SIs had agreed that if the reorganization could not be executed by 31 January 2021, the SIs could exercise either one of the two rights. One right was to demand Evergrande to repurchase their shares. Another right was to demand Evergrande to compensate 50% of their shares. Later the SIs invested RMB130,000mn in total, instantly enabling Evergrande to alleviate liquidity strains and continued to expand aggressively by leverage. Was the RMB130,000mn properly accounted for in financial statements, despite RMB2,500mn of "financial derivative liability" throughout 2017 to 2020? Should the two "rights" be treated as "options" in accounting?

Spreadsheet supplement for Case HK1345

This case explores a way to identify an industry by simply examining a set of financial ratios. Certain industries have unique financial statement items and, hence, unique financial ratios. Some, on the other hand, have a few financial ratios that are consistently high or low. Students will grapple with practical questions on the identification of various industries simply by analyzing sets of financial ratios. In a practical context at school or workplace, students will then be able to reverse the process, i.e., to identify and apply financial ratios to certain significant industries, such as a stock exchange, banking, insurance, oil and gas, IT consultancy, e-commerce, and pharmaceutical.

China Huarong Asset Management Co., Ltd. was a majority state-owned financial asset management company in China, with a focus on distressed asset management. On 30 June 2020, Huarong had around CNY1.7tn in total assets. It missed the deadline for its 2020 annual report filing to the SEHK at the end of March 2021, and its shares were suspended from trading after 1 April 2021. A major concern the investors had about the company was a direct result of the execution of its former chair, Lai Xiaomin, in January 2021 for financial crimes involving the abuse of power to allocate credit through Huarong. In April 2021, offshore US dollar bonds issued by Huarong plunged in value, and credit agencies downgraded the company's ratings as an issuer and as a company. There was also pressure on Huarong for the repayment of around CNY143bn in Chinese corporate debt due at the end of 2021. In order to reduce the risk of the market tumbling and to assist Huarong's cash flow, Chinese regulators asked Chinese banks to provide loans to the company, in order to stabilize the banking industry. In addition, the regulators suggested Huarong had the option of restructuring.

This case explores the accounting treatment for the "rent concessions" offered by lessors to lessees during the Covid-19 pandemic. The protagonist company is Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (Xiabuxiabu or the Group, HKEx: 520). Xiabuxiabu was one of the hot-pot restaurant chains with the highest relevant market share in mainland China. As the Group had been serving retail customers in its retail branches, the newly promulgated "Covid-19 Related Rent Concessions" had a significant impact on lease accounting for its branches. During the pandemic, many lessees had obtained rent concessions granted by lessors in numerous forms, such as a rent payment (lease payment) holiday, a reduction in rent payments for certain period of time, a deferral of rent payments, and a change to the lease term etc. In May 2020, the International Accounting Standards Board (IASB) issued "Covid-19-Related Rent Concessions" as a "practical expedient" to lessees. This expedient came as an "optional" relief to lessees from the mandatory application of IFRS 16. As such, lessees had the option of not accounting for rent concessions as "lease modifications". This greatly simplified lease accounting particularly during the pandemic. Xiabuxiabu had chosen to adopt such an expedient since the financial year 2020.

Samson Paper's 森信紙業 (SEHK: 731) main business was the manufacturing, trading, and marketing of paper products in China. After the company failed to file its year-end 31 March 2020 annual report before the deadline, the stock was suspended. Following the suspension, a board meeting was held on 11 July 2020, after which the board received resignation letters from one non-executive director (NED) and three independent non-executive directors (INEDs). In a public announcement on 14 July 2020, Samson declared that at the board meeting, Samson's auditors had advised: "There were substantial payments made to the company's connected party's suppliers. Such payments were booked to inter-company accounts rather than amounts due to the connected party." According to Samson's announcement, the NED, INEDs, and the auditor did not receive satisfactory replies from management on the commercial substance and intentions of these transactions during the meeting. The management denied any wrongdoing in relation to these transactions. On 18 July 2020, after the company had defaulted on a HKD780mn loan, it filed for voluntary liquidation.

This case explores how Haitong International Securities Group Limited (Haitong, the Group, or SEHK: 665) had been accounting for margin loans under the Hong Kong Financial Reporting Standard 9 Financial Instruments (HKFRS 9) since the mandatory adoption date on 1 January 2018. Haitong belonged to one of the largest financial groups listed on the Hong Kong Stock Exchange in terms of market capitalization. Because of the fame and size of the Group, the protagonist Nancy (regional CFO) made reference to this company in finding out the accounting issues that could potentially occur in starting margin financing business in Hong Kong. Haitong incurred 'impairment charges, net of reversal' (net impairment charges) of HKD238.8mn and HKD634.5mn respectively in the year ended 31 December 2018 (FY2018) and 31 December 2019 (FY2019). The portion attributable to advances to customers in margin financing (margin loans or margin loan receivables etc.) constituted HKD353.7mn (148.1%) and HKD532.3mn (83.9%) of the aforesaid net impairment charges in the respective years. The case seeks to highlight the advantages and disadvantages of entering the securities margin financing business when IFRS 9 is in place. Students will learn the classification of margin loans under IFRS 9 and the measurement of expected credit loss (ECL) of these assets by three "stages" as prescribed by IFRS 9. Students will also grapple with questions on formulating the internal controls in credit risk management under the context of securities margin financing.

iQIYI Inc. (爱奇艺), which promoted itself as the "Netflix of China," was one of the three largest entertainment streaming platforms in mainland China. It was listed on the Nasdaq (NASDAQ: IQ) after being spun-off from Baidu Inc. (百度) (NASDAQ: BIDU). In April 2020, Wolfpack published a research report on iQIYI, accusing it of inflating revenue numbers, among other things. The report claimed iQIYI's revenue in FY2019 was overstated by 27% to 44%, equivalent to CNY8bn to 13bn. One of the accusations was that iQIYI recorded more than its own share in revenue, and included a large portion of its membership subscriptions bundled with services offered by its business partners.

Ant Group (螞蟻集團) was on course to raise HKD273bn in a dual offering on the Hong Kong Stock Exchange (SEHK) and the Shanghai Stock Exchange's (SSE) STAR Market. Pre-IPO, Ant's value as a fintech was estimated at HKD2.43tn. As investors were subscribing en masse, China's central bank and finance regulators published a new draft legislation to regulate "micro-lending business operated by internet." What would have been the largest IPO in history was cancelled just two days before its scheduled listing on 5 November 2020. Ant spun off from its parent, Alibaba. It owns Alipay, one of the two largest digital payment systems in China. Ant diversified into a fintech business that included lending, wealth management, and insurance business lines among others. Ant's lucrative lending business, explosive growth, and business model disrupted the Chinese traditional finance industry. After the new legislation came into effect, Ant's capital reserve ratio for its CreditTech business would have to increase from the current 2% to 30%. This was expected to impact the size and growth of its lending business and therefore its value.

This case explores the accounting treatment of cryptocurrencies that Huobi Technology Holdings Limited (Huobi Technology, stock code: 1611.HK) had classified as intangible assets. Huobi Technology operated a digital asset (cryptocurrency) trading platform and rendered technology solution services in relation to blockchain. Huobi Technology received a loan in both cash and cryptocurrencies from its parent company, Huobi Global Limited. The cryptocurrencies portion of this loan was recognized as intangible assets by Huobi Technology in its statement of financial position. Such accounting classification also had financial implications across statements of profit or loss and other comprehensive income, statement of cash flows, statement of changes in equity, among others. The case seeks to highlight the accounting standards governing recognition of intangible assets. Through the case, students will grapple with the practical questions of how to develop an accounting policy with regard to cryptocurrencies.