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The so-called "infrastructure finance gap" was a problem in Nigeria as in many parts of the world. Infrastructure projects like power plants and dams were very large capital investments that could generate long term consistent cash flows, but their financing and delivery involved multiple risks and uncertainties. If funds for infrastructure development came from traditional international sources like the World Bank or African Development Bank, those lenders would worry about foreign exchange, interest rates, and political risk and would almost always seek sovereign guarantees (payment guarantees from the federal government). Such assurances and guarantees were hard to come by, difficult to negotiate, and project inception could take decades. In this context could pension funds or private equity-type structures be viable alternative sources of financing for infrastructure? By 2017 Nigeria had reformed its pension administration system so that pension funds could both accept significant amounts of retirement funds from workers and, manage and invest those funds in a transparent and safe structure. One of the asset classes in addition to government bonds, equities, and corporate bonds that was authorized for investment by pension funds was infrastructure debt securities. Until recently, few Nigerian infrastructure securities had strong enough credit ratings to be investable by cautious pension funds. Infrastructure Credit Guarantee Company (InfraCredit) hoped to break that logjam by supporting infrastructure issues denominated in local currency with credit assurances taking the place of sovereign guarantees. Other entities took different approaches to raising capital for infrastructure in this market. Africa Plus Partners (Africa Plus), for example, proposed a fund structure with features of American private equity. It was not yet clear if this type of fund arrangement would be as attractive as debt for pension fund investors.

This case highlights the business challenges associated with a financial technology firm, New Constructs, that created a technology that can quickly parse complicated public firm financials to paint a clearer economic picture of firms, remove accounting distortions, and aid investment analyses. Combining machine learning with human financial analysts, this technology automated the collection and classification of comprehensive quantitative data from annual (10-Ks) and quarterly reports (10-Qs). The technology parsed information from the face of the financials and from disclosures in the management discussion and analysis or the footnotes sections to the financial statements (e.g., gains and losses that are transitory in nature or off-balance-sheet liabilities like future operating lease payments). Using these data, New Constructs applied a set of transparent and clearly-defined adjustments to a firm's income statement and balance sheet to create alternative measures of its sustainable operating profits, invested capital, and return on invested capital. This case highlights the complexity of financial disclosures in 10-Ks and 10-Qs and how machine learning and human analysts can work together to improve the quality of investment research. This case also highlights how analysts may adjust income statements and balance sheets to understand firm performance better or facilitate forecasting. However, could the CEO of New Constructs convince market participants of the technology's (and the data's) value? What else could the company do to establish a toehold in an increasingly competitive market for financial and alternative databases?

The COO for Sonvilier Pen, an elite manufacturer of high-quality ballpoint and fountain pens, had gotten a proposal to outsource two pen components to Li Manufacturing, a specialist in the molding and production of intricate metals, located in southeastern China. The proposal was intriguing, but there were a number of factors for the COO to consider before making a decision.

Juliette is a young entrepreneur, and she has the idea of starting two lemonade stands for the upcoming summer and getting her younger brothers to work them. The businesses must plan for launch, operate during the season, then determine financial performance and key metrics to assess success. Which brother did a better job managing the business? The case introduces key accounting and financial statement and performance measures in an intuitive way, is interactive and engaging, and can be used with a variety of audiences, as discussion can span from basic financial statement construction and analysis to more complex issues around accrual accounting, revenue recognition, cash flow timing, and the interaction among financial statements.

Supplement to case 118034.

On February 25, 2013, the chief investment officer at University of Regina Investing (URI) was reviewing the draft copy of the annual report for 2012 that was to be submitted to the client, the University of Regina. One investment that stood out was Poseidon Concepts Corporation, which the fund had bought at $14.02 per share in April 2012, had reached a high of CA$16.02 in September 2012, and had eventually lost all stock value. The chief investment officer decided to review the transaction to identify any warning signs or red flags indicating that Poseidon Concepts Corporation's management was involved in earnings manipulation. If there were signs, and if they had been identified earlier, could URI have avoided incurred losses?

On February 25, 2013, the chief investment officer at University of Regina Investing (URI) was reviewing the draft copy of the annual report for 2012 that was to be submitted to the client, the University of Regina. One investment that stood out was Poseidon Concepts Corporation, which the fund had bought at $14.02 per share in April 2012, had reached a high of CA$16.02 in September 2012, and had eventually lost all stock value. The chief investment officer decided to review the transaction to identify any warning signs or red flags indicating that Poseidon Concepts Corporation’s management was involved in earnings manipulation. If there were signs, and if they had been identified earlier, could URI have avoided incurred losses?

Partners in Health, a global NGO focused on delivering health care to residents of rural underserved communities, conducts a project on the cost of primary care at five sites in the Central Highlands of Haiti. It devises a simple approach for tracking the resources used by patients being treated for diverse medical conditions, as an input to a time-driven activity-based costing model. The results show considerable cost diversity across the five sites, but organizational leaders differ on the interpretation and action implications of the findings.

Michael Cox, a third generation producer of eggs based in the small town of Summers, Arkansas, converted production in 2007 from conventional caged white eggs to specialty eggs bearing the marketing attributes of organic, cage-free, free-range, and pasture-raised. Although he did this to secure contracts with better margins, in 2016 there was a glut of conventional white eggs on the market and that was depressing prices. Because of this, consumers were switching from expensive specialty eggs to the cheap white eggs. Now a key contract that Cox had with CCF Brands for the output of 150,000 hens laying certified USDA organic cage-free eggs was expiring. Faced with selling the eggs at a loss on the open market, Cox must decide what to do. In this case students can study a number of basic and advanced managerial accounting concepts, including relevant and irrelevant costs for short-term decision making, break-even analyses, sell or process further, and when to drop a product. Students will build a table for marginal revenue and marginal cost for egg production. This analysis is more advanced because the hens do not generate revenue evenly of the production cycle while the variable costs are relatively even. This case is well suited for an undergraduate or graduate course in managerial accounting covering short-term decision-making. Although receiving light treatment in the instructor's manual, the case could also be used to study longer term business strategy.

It was June of 2006, and Amanda Walsh, interim CFO, was soundly criticizing herself for not seeing the bigger picture of what had gone on during the previous 18 months at Vanderville Plastics Company (VPC). Two prior years' financials were still in "draft" form with auditors' statements showing that the firm might not be a going concern. Peter Giroux, the CFO who hired her, had kept Amanda from having any interaction with the company vice presidents, the board, or the owners, maintained a tight grip on both the human resources and payroll operations, and refused to provide details when she questioned him about any aspect of the financial operations. Then, in January of 2006, close to a million dollars in bonuses were paid to senior management and employees, despite the company's precarious cash flow position. Not long after the bonus payment Peter resigned unexpectedly. Today's phone call from Ken Duffy, one of the owners, made all the pieces fit together. Duffy had called for clarification about the sudden decrease in the company's accrued liabilities. The call ended abruptly when Amanda told him that bonuses were paid for performance in the previous 2005 fiscal year. His shocked reaction on the phone made it clear that the owners had not authorized the bonus payments. Amanda started to think about the succession of events since she came to VPC to better understand what this all meant, what was likely to happen next, and what she should do. The case exposes students to the day-to-day life of a professional accountant employed in a small business. COSO considers opportunistic behavior from senior management to secure incentive compensation by using adjusting journal entries the most likely way for fraud to occur. Looking at the events surrounding the payout as they unfold through in the day-to-day life of Amanda should help students develop the professional judgment and skepticism required to better interpret the oral assertions made by management,

In October 2016, Tesla asked its shareholders to ratify their $2.4 billion bid for SolarCity. Tesla had announced a series of large projects in the preceding months including the unveiling of the Model 3, the new Solar Roof, and pushing forward the opening of the Gigafactory. All of these projects required high upfront costs, and with SolarCity's debt burden, investors were left questioning whether the acquisition imposes too much financial risk on Tesla as well as the motives behind the move. Weeks prior to the merger, Tesla released its third-quarter financials, which reported record-breaking deliveries, GAAP profits (for the second time in the company's history) of $22 million, and positive free cash flow of $176 million. With Wall Street expecting a loss, these results came as a shock. Yet, questions remained regarding the quality of these earnings, which benefitted from the company's sales of zero emission vehicle tax credits and the cancellation of its resale value guarantee program. With the ISS backing Tesla's merger proposal in the days leading up to the final vote, institutional investors and shareholders wondered whether they should vote for or against the deal.