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The company uses the units of activity method to account for its rental inventory. A prominent hedge fund advisor recommends the company's stock be sold short.

Spreadsheet Supplement for case 101107

The Taiyuan Project involved the construction of a pipeline to supply water from the Yellow River to Taiyuan, the capital city of Shanxi Province, China. The main contractor for the project intended to appoint Taiyang Company, a six partner joint venture, as the supplier of the 82 kilometres of prestressed concrete cylinder pipe (PCCP) needed for the project. The general manager for Taiyang Company had to decide what the company's involvement should be. The company was the only supplier of PCCP in China, however, due to a slow start, it had no cash. A new factory and new equipment would be required to meet the requirements of this project. He would have to work out a capital budget for a cash-constrained situation while considering whether to find a joint venture partner and what the most advantageous way to structure the company would be from a tax perspective.

The seller of fractional interest aircraft programs must decide how to account in its IPO for the sales of fractional interest aircraft programs. Teaching Purpose: To expose students to revenue recognition issues.

Variations in tax impact make it essential to know a person's tax status for personal financial planning and the structuring of business transactions. A broad overview of the Canadian income tax system is presented in this note along with descriptions of various types of taxable receipts. Key messages are: that different types of income are often taxed differently; that same types of income are often taxed differently depending on the entity that receives it; and that the amount of income tax varies based on the level of income the taxpayer earns.

This note will familiarize users of financial statements with how Earnings Per Share (EPS) is calculated, what accounting rules apply, and how the new CICA Handbook Section 3500 will make Canadian, U.S. and international EPS figures more comparable. It also includes a simple exercise to test the students' understanding of the mechanics. The accompanying teaching note provides the solution.

This note will familiarize users of financial statements with how Earnings Per Share (EPS) is calculated, what accounting rules apply, and how the new CICA Handbook Section 3500 will make Canadian, U.S. and international EPS figures more comparable. It also includes a simple exercise to test the students' understanding of the mechanics. The accompanying teaching note provides the solution.

This technical note addresses the taxation of employment-related income and benefits (including salary deferrals, allowances, reimbursements, automobiles, employee loans, stock options, and other taxable and non-taxable benefits) from both an employee's and an employer's point of view. A section is also included on deductions (including salesperson's expenses, travelling expenses) and other related items (moving expenses, death benefits). Several questions are included to allow students to apply the theoretical information presented in the case.

This note explains how federal taxes payable are computed for an individual taxpayer. The mechanics underlying Canada's progressive tax structure are reviewed in order to determine taxes payable and how marginal tax rates vary with income. The main tax credits available to an individual are considered as well as associated tax planning opportunities. Several short problems are provided at the end of the note.

Spreadsheet Supplement for case 101030.

In June 2000, Novartis reorganized its pharmaceutical business to form global business units in oncology, transplantation, ophthalmology, and mature products. The remaining primary care products continued to be managed within global functions (e.g., R&D and marketing). The new organization created a matrix structure and new roles and responsibilities for heads of business functions, CEOs of new business units, and country managers operating in over 100 countries.

Owners of small firms are not likely to give much thought to an accounting system during the planning or implementation phases of their business. The business plan forces them to use pro forma financial statements, and soon afterwards they will need certified accounting methods for meeting the needs of investors, lenders, and taxing authorities. But systems designed solely for those needs often fail to provide the managerial accounting information necessary to operate the venture--to make sound operating, strategic, and tactical decisions. The traditional accounting system relied on to do this is "absorption costing." Absorption costing, however, does not include costs of marketing and distribution. This article demonstrates how activity-based costing (ABC) provides a better framework for gauging the profitability of product lines and avoids some of the distortions caused by absorption costing. ABC is particularly useful in service firms by identifying activities, specifying cost drivers for each activity, calculating charging rates for each activity, and allocating costs to each product/service. In particular, ABC enables the firm to isolate the costs of unused capacity. Simple examples are provided and worked through one step at a time to illustrate the differences in logic and conclusions yielded by ABC as opposed to absorption costing.

Proposed changes by the SEC will reduce the accounting profession's conflicts of interest arising from consulting. But auditors can never be truly independent when they are hired and fired by the companies they audit.

To be used with (9-192-150).

An assistant is asked to prepare illustrative derivative and hedge accounting examples for the audit committee. Students are required to complete the examples. Teaching Purpose: Introduces students to the basics of derivative and hedge accounting.

To be used with (9-100-012).

Discusses revenue recognition and reporting rules, guidelines, and issues. A rewritten version of an earlier note.

W.S. Industries undertakes the design and implementation of an activity based costing (ABC) system, and the ABC information empowers workers to make process improvement decisions. Workers' incentive pay is tied to cost savings from process improvements.

Spreadsheet Supplement for case 101062

The Canadian Imperial Bank of Commerce (CIBC) is a large Canadian financial institution with seven million customers. This three-case series outlines the challenges faced by the bank in designing and implementing a customer profitability management system. The vice-president of strategy development, personal & commercial banking, received approval to develop a customer profitability system. The system would help to determine: who were the bank's profitable customers, how to acquire and retain those customers, and how to change behavior to convert unprofitable customers or make profitable customers more so. There were accounting, business and technology issues to be resolved. The supplemental (B) and (C) cases (products #9B00B015 and 9B00B016), follow through by examining how the data on the system could provide the bank with a competitive advantage, and the challenges of implementing the system.