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The determination of property income for Canadian income tax purposes is discussed in this note, along with some basic tax planning issues. Some basic examples illustrate the concepts, and several problems are provided.

A new administration in the City of Indianapolis is initially determined to privatize many municipal services. Before taking this action, however, the city managers want to know the current cost of performing these services with the municipal workers. Existing financial systems record how much the city has been spending by functional categories and departments, but contain no information about the cost of providing services. The city establishes a task force to develop activity-based (ABC) estimates of the cost of filling potholes. It shows the information to the municipal workers and allows them to institute new cost-saving procedures so they can submit their own bid in competition with private contractors. This case describes the development of the ABC model and the reaction of the city workers to the newly revealed information.

Supplements the (A) case.

Spreadsheet Supplement for case 196115.

Spreadsheet Supplement for case 196121.

In an introduction to standard costs and cost variances, discussion, formulae, and examples explore the idea of comparing actual costs to those that were expected.

Kim Tomar has to evaluate bids from potential suppliers for aircraft parts for de Havilland's Dash 8 aircraft. As a financial analyst, Tomar has to make a recommendation to de Havilland's Source Selection Board on the selection of a new supplier. Tomar's recommendation must be based on the prices quoted by the bidders, and her assessment of the firms' ability to be a long-term supplier to de Havilland. This requires a financial analysis of the bidder firms.

The acting controller and head of the accounting department at Texas Western Thailand has been reprimanded for developing and using a modified version of the standard company accounting system in Thailand. He believes that the modified system is more appropriate for conditions within his division and in the Thai environment. This case could be used in an international accounting class to discuss problems arising from different accounting methods among countries; in an international cross-cultural management course, or in an international organizational behaviour course dealing with the tensions between international standardization versus local responsiveness.

In the past, companies took a cost-plus approach to pricing, charging high prices when a product was first released, then lowering prices when production was scaled up. Lean competitors make that approach impossible, however, as they are quick to introduce competitive "me too" products to market. To gain and hold market leadership today, a company must design the cost out of its products from the outset. Target costing is a cost-management technique that lets a company do just that: The company determines how much customers are willing to pay for a product and then designs the product within cost limits that will permit it to sell profitably at the predetermined price.

Explains variance analysis. Concepts of price variance and quantity variance are introduced to analyze prime cost variances. Spending variance and capacity variance are used to analyze overhead variance. Consistent with conducting variance analysis in an activity-based costing setting. All concepts are illustrated graphically.

Spreadsheet Supplement for case 196109.

Supplements Identify the Industries.

The president and controller of Western Chemical Corp. are discussing the best way to measure and report performance of foreign subsidiaries. One subsidiary is a joint venture with its own borrowing capacity; another is wholly owned; and a third is wholly owned and serves as a sales base for regional sales. Applying generally accepted accounting principles gives income measurements that seem to conflict with true success of the operations.

Spreadsheet Supplement for case 196079

Spreadsheet Supplement for case 196108

Explains the concepts and procedures behind the statement of cash flows. Presents an overview of the reporting objectives of this report, and describes in detail the preparation of the cash flow statement using both the indirect method and the direct method. A complete numerical example is presented. Financial analysis techniques using the cash flow statement are also described. A rewritten version of an earlier note.

Following Intel Inc.'s decision to replace flawed Pentium chips, the company faces revenue recognition choices. Events leading up to IBM's decision to halt shipment of computers that have Intel's microprocessor inside and Intel's decision to replace all the flawed chips are outlined. Intel must decide whether to: make a provision for the costs of replacing the chips, defer recognition of revenue on the flawed chips that it has now agreed to replace, or make no entries on grounds of materiality.

Supplements the (A) case.

Describes the long waiting time experienced by customers in Health Stops and asks students to specify the changes in its business model which could help solve the problem.

A supplier questions the credit extended to two customers during a weak sales period.