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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?

In December 2022, Shariq Nomani had been living with his family in a rented apartment in Lucknow, India. Even though they liked the place, which had all the necessary amenities, they were thinking of buying a unit in the same community. After collecting all the necessary information, Shariq sat down to figure out the best alternative between two options: buying and renting. He needed to undertake a comprehensive quantitative analysis by applying the concept of time value of money to make the optimal decision.

In late 2021, Vahe Dombalagian, a managing director at Madison Dearborn Partners (MDP), contacted MoneyGram International Inc. (MoneyGram) chief executive officer Alex Holmes to discuss the middle-market private equity (PE) firm’s potential interest in a transaction with MoneyGram. MoneyGram was a global leader in the cross-border peer-to-peer (P2P) payment market, working to transition to the fast-growing digital payment market amid the emergence of low-cost financial technology competitors.<br><br>The case provides a discussion about deal evaluation metrics used by leveraged buyout (LBO) PE firms and provides necessary information to construct an LBO model to calculate the internal rate of return (IRR) and multiple of invested capital (MOIC) to determine an appropriate offer.<br><br>MDP was granted access to internal MoneyGram information and met with firm representatives as it worked with its financial advisers to obtain a debt commitment letter. The banks agreed to fund a debt financing package, and MoneyGram notified bidders that definitive acquisition proposals needed to be received by January 24, 2022. The MDP deal team needed to work quickly to finalize their offer.

Instructor Spreadsheet to accompany product W32221.

Student Spreadsheet to accompany product W32220.

In late 2021, Vahe Dombalagian, a managing director at Madison Dearborn Partners (MDP), contacted MoneyGram International Inc. (MoneyGram) chief executive officer Alex Holmes to discuss the middle-market private equity (PE) firm's potential interest in a transaction with MoneyGram. MoneyGram was a global leader in the cross-border peer-to-peer (P2P) payment market, working to transition to the fast-growing digital payment market amid the emergence of low-cost financial technology competitors.<br><br>The case provides a discussion about deal evaluation metrics used by leveraged buyout (LBO) PE firms and provides necessary information to construct an LBO model to calculate the internal rate of return (IRR) and multiple of invested capital (MOIC) to determine an appropriate offer.<br><br>MDP was granted access to internal MoneyGram information and met with firm representatives as it worked with its financial advisers to obtain a debt commitment letter. The banks agreed to fund a debt financing package, and MoneyGram notified bidders that definitive acquisition proposals needed to be received by January 24, 2022. The MDP deal team needed to work quickly to finalize their offer.

Spreadsheet Supplement for Case W32220

The case explores the challenges of revenue recognition and financial reporting for Stride Funding (Stride), a fintech startup that has disrupted the student loan market. Stride leveraged proprietary machine learning and financial models to underwrite alternative student loans via Income Sharing Agreements (ISA). Under an ISA, borrowers agree to share a portion of their future earned income with a lender for a set period of time. Stride has adopted a distinctive business model that is analogous to the Software as a Service (SaaS) business. Rather than issuing ISAs directly, Stride performed as a program manager and created lending platforms that enabled educational institutions and programs to fund ISAs using their own capital. As a fund manager, Stride was responsible for developing credit models, administering the ISA contracts, managing account status, producing the loan documents, and updating the platform and program structure. In return for their services, Stride charged various fees to the institutions and programs. Having successfully completed its Series A round, Stride experienced substantial growth and improved business performance. As the company grew, its executives recognized the need to change its current financial reporting based on cash accounting to comply with U.S. GAAP. They anticipated that this change would affect how to report some of its revenues which are important financial metrics for early-stage companies like Stride. The CEO of Stride Funding wanted to know the full financial impact of this change and its implications for the next funding round. Moreover, they needed to determine whether it made sense for Stride, with its innovative business model, to adopt the GAAP reporting at this juncture.

Hope Medicals owner, Shiva Aruguman, was considering entering the online pharmacy market. Hope Medicals was a local pharmacy in Madurai, India’s Tamil Nadu state, and Aruguman was at a strategic crossroads—he had to decide whether to expand into the online pharmacy market. With the challenges (financial and non-financial) of integrating the “brick” and “click” modes of his pharmacy business, Aruguman had to conduct an analysis based on capital budgeting and run a Monte Carlo simulation to determine the potential profitability and risks of such a venture.

Instructor Spreadsheet to accompany product W34714.

In June 2020, the owner and director of UnityCars Pvt. Limited (UnityCars), a car rental company in Melbourne, Australia, was reviewing his fleet of vehicles and the company's operation over the previous few months. The COVID-19 pandemic and related lockdowns had a negative and severe impact on UnityCars' revenues. The company had expanded rapidly in previous years, becoming highly leveraged, which made it more vulnerable to negative shocks. A sharp reduction in revenues, high expenditures, and the combination of these with the uncertainty of the macro environment had posed a serious threat to the survival of UnityCars. The owner wanted to forecast the company's operating cash flow and decide whether he should borrow or reorganize the fleet to meet his liquidity needs.

Markets for carbon trading function poorly, and many traded offsets do not actually perform as promised. Without robust protocols for monitoring offsets and in the absence of proper accounting mechanisms, market-based approaches to reducing atmospheric GHG will be vulnerable to misrepresentation and fraud. This article presents an accounting framework based on five core principles. The first two define what can and cannot be counted as an offset and what may or may not be traded. The remaining principles set out basic accounting guidelines for offsets. Together they provide the foundation for a well-functioning market that accelerates innovation and deployment of improved offsetting technologies, leading to atmospheric decarbonization.

This case is used to demonstrate the acquisition method in the accounting for business combinations using the SGX-listed firm Medinex, which made three acquisitions in 2019. These were reported in its FY 2020 annual report. Medinex's expansion-through-acquisition strategy resulted in Medinex reporting high goodwill amount. The Securities Investors Association (Singapore) (SIAS) had raised queries regarding Medinex's acquisitions and the possibility of overpayment due to aggressive assumptions used in their valuations. How valid were SIAS's concerns about aggressive assumptions and overpayment? If goodwill was a significant element of each acquisition, were there enough disclosures for shareholders to understand what the goodwill represented? The primary learning objectives are to: 1. Understand the significance of the acquisition date in the acquisition method; 2. Understand how consideration transferred is determined; 3. Apply the requirements of the standard to determine the goodwill; 4. Identify the key assumptions needed for the goodwill impairment test; and 5. Assess the adequacy of the disclosures on goodwill.

This technical note provides a compiled 2022 annual report for the United States of America, consolidated for the public and private sectors. It includes financial statements, accompanying notes, discussion and analysis, and a summary of risk factors. An introductory section specifies the report's overarching purpose, as well as describing the role of accounting more generally for any defined entity. This annual report is designed to enable access to objective and transparent financial information about the United States within a single document. It can serve as a bridge to a candid and complete conversation about the nation's economic and financial condition. The summary is a descriptive work, not theoretical. To increase accessibility, effort was made where possible to present and describe information in layman's terms and language.

Dan McCrum, an investigative journalist for the Financial Times, had spent the past six years fighting to expose German payment processing firm Wirecard. The company had enjoyed years of exponential growth and was viewed by several investors as the poster child of Germany's tech sector. But to McCrum something smelled fishy and he couldn't help but wonder if Wirecard's true dealings weren't just hidden behind its complex business model. He started chronicling his suspicions of mass scale accounting fraud in his articles, but he could never had expected this would make him the target of several cyber attacks, spy operations and legal procedures. In June 2020, as Wirecard crumbles, McCrum reflects on his journey.

In late 2020, The Goodyear Tire & Rubber Company (Goodyear)’s chief executive officer, Richard Kramer, told Cooper Tire & Rubber Company (Cooper)’s chief executive officer, Bradley Hughes, that Goodyear would submit an acquisition proposal by the end of the year. Goodyear had spent the last two years enduring global weakness in the automotive industry and the onset of the worldwide COVID-19 pandemic, which contributed to Goodyear’s stock falling 70 per cent below its high of $35 in 2018. Kramer attributed the stock’s decline to an “industry downcycle,” and one analyst speculated that a merger could provide much needed cost and revenue synergies. Goodyear had used mergers and acquisitions (M&As) to achieve scale and fuel its growth in the past, and Kramer’s team needed to decide if a merger with Cooper could help them weather the downturn and emerge stronger. Kramer and his team identified several cost synergies, totalling $165 million per year. They also expected efficiency and tax synergies with a present value of at least $700 million as well as revenue synergies. Goodyear was considering using a combination of debt, stock, and cash to finance the transaction. To avoid earnings per share dilution from issuing too many shares as merger consideration, they were working with financial advisor J.P. Morgan to secure up to $2.314 billion of new debt financing. Kramer told Hughes that his team would work over the year-end holidays to provide “a revised proposal or other update” in January 2021.

Student Spreadsheet to accompany W32285.

Instructor Spreadsheet to accompany product

In late 2020, The Goodyear Tire & Rubber Company (Goodyear)'s chief executive officer, Richard Kramer, told Cooper Tire & Rubber Company (Cooper)'s chief executive officer, Bradley Hughes, that Goodyear would submit an acquisition proposal by the end of the year. Goodyear had spent the last two years enduring global weakness in the automotive industry and the onset of the worldwide COVID-19 pandemic, which contributed to Goodyear's stock falling 70 per cent below its high of $35 in 2018. Kramer attributed the stock's decline to an "industry downcycle," and one analyst speculated that a merger could provide much needed cost and revenue synergies. Goodyear had used mergers and acquisitions (M&As) to achieve scale and fuel its growth in the past, and Kramer's team needed to decide if a merger with Cooper could help them weather the downturn and emerge stronger. Kramer and his team identified several cost synergies, totalling $165 million per year. They also expected efficiency and tax synergies with a present value of at least $700 million as well as revenue synergies. Goodyear was considering using a combination of debt, stock, and cash to finance the transaction. To avoid earnings per share dilution from issuing too many shares as merger consideration, they were working with financial advisor J.P. Morgan to secure up to $2.314 billion of new debt financing. Kramer told Hughes that his team would work over the year-end holidays to provide "a revised proposal or other update" in January 2021.