Sink or Float: OW and Duke Royalty Investment - M Gillet, A Horrocks (2018)
Kroecker Farms Limited: Expanding Hemp Production - M Gillet, J Kelly (2018)
Mystery Corporations Challenge
Vaughan Radcliffe, Eeshan Paranjape, Evan Huang, 2014
The case presents students with common size balance sheets, financial ratios and related financial information. Students are required to correctly identify a series of corporations in various industries based solely on their analysis of this financial data.
Accounting for Content at Demand Media
Chris Sturby, Jessica Kelly, 2013
In this, an analyst assesses Demand Media’s business model, strategy and accounting policies in the face of media scrutiny around its capitalization of media costs as well as some of its non-GAAP disclosures. The analysis is additionally compared to the data available for other companies.
Essar Energy: Indian GAAP, U.S. GAAP or IFRS? (A)
David J. Sharp, Sudershan Kuntluru, Paritosh Basu, Sanjay Chauhan, 2013
This case examines the decision of Essar Group (Essar), a conglomerate based in India, to raise capital through an IPO offering on either the Indian Stock Exchange or the London Stock Exchange. The chief financial officer of Essar has to recommend to management where to raise the needed capital and what accounting standard to adopt.
Loblaw Companies Limited: Analyzing an Annual Report 2012
Murray J. Bryant, 2013
The case analyzes the annual report of a Canadian company to check whether it is worth investing or not. It includes measures such as an analysis of profitability — including return on capital employed, return on equity, return on sales, gross profit margin and asset turnover — and liquidity measures.
Encana Corporation: Accounting for Foreign Currency
Darren Henderson, Chris Sturby, Gillian Heisz, 2012
This work encompasses the reassessment of Encana’s decision to choose the Canadian dollar as functional currency and US dollar as presentation currency. To make an informed decision, Encana must apply the guidance in IAS 21, “The Effects of Changes in Foreign Exchange Rates.” Furthermore, Encana must determine the impact of its choices on the financial statements.
Capitalization of Costs at Salesforce.com
Darren Henderson, Chris Sturby, Jessica Kelly, 2012
The case investigates the concerns investors have over cloud computing software industry. As an example, Salesforce.com’s decision to capitalize software development costs has sparked some debate among such investors and students are asked to assess the accounting policies and standards to evaluate the feasibility of making such investments.
Ford Motor Company: Accounting for Deferred Taxes
Darren Henderson, Christine Liu, 2012
The case represents Ford Motor Company’s consideration of whether to reverse the valuation allowance it has recorded over its deferred tax assets. To improve business conditions over 2009 and 2010, Ford must decide whether it is “more likely than not” to realize the value of its deferred tax assets and reverse the $15.7 billion valuation allowance it has recorded. If the valuation allowance is reversed, Ford must also decide how to present the change in valuation in its financial statements.
Groupon and the SEC
Vaughan S. Radcliffe, Mitchell Stein, Alexis Gottschalk, 2012
This particular case takes a look at the financial statements of Groupon that attracted a great deal of controversy due to revenue recognition policies that produced substantially high revenues for the corporation. The case provides an opportunity to review Groupon’s S1 filing made prior to an initial public offering.
Artis REIT — Accounting for Investment Properties Under IFRS
Chris Sturby, 2011
In this case, the CFO of Artis REIT, a publicly traded real estate investment trust in Canada, must decide how to account for investment properties as the trust adopts international financial reporting standards (IFRS). The CFO must consider all of the relevant stakeholders of the trust in order to decide the appropriate course of action.
Kinross Gold Corporation: Accounting for Stock-based Compensation
Darren Henderson, Christine Liu, 2011
This case examines Kinross Gold’s consideration to change the stock-based compensation plans that it uses for medium- to long-term executive incentives. A human resources consultant has been retained to make recommendations. She is responsible to quantify the impact of her recommendations on stock-based compensation expense.
Air Canada: Defined Benefit Pension Plans
Darren Henderson, Christine I. Wiedman, Pricilla Cheung, 2011
This work revolves around the recent weaknesses and three-day strikes prevalent in the airline industry. In particular, it manages to examine the long term prospects of Air Canada from an investor’s perspective. Additionally, the analysis includes the change in Air Canada’s employer pension plan to new employees and how that may have any impact on Air Canada’s future financial projections.
Starbucks: Venti Leases
Vaughan S. Radcliffe, Mitchell Stein, Caleb Yong, 2011
This case depicts a financial analyst trying to make sense of Starbucks’ finances and drawing from recent projects of the IASB and FASB to identify lease accounting as a key issue for the firm. The case underscores the importance of having a full picture of a company’s obligations in order to understand its overall performance.
The Evolution of the Coca-Cola Company’s Financial Disclosures
Mitchell Stein, Martin Persson
The Coca-Cola Company, founded in Atlanta, Georgia, in 1886, is an iconic American company that sells its products around the world. As the business and financial reporting context has changed over the decades, the company’s financial disclosure practices have also evolved—from its first, two-page, public annual report in 1920 to present-day annual reports that extend to over 150 pages. This note introduces corporate disclosure and the expansion of such disclosures over time. To aid the discussion and contextualize the evolution of corporate disclosure, the note also presents a short history of the Coca-Cola Company and securities legislation in the United States.
Tesla's Non-GAAP Accounting Measurements: Revenue Recognition and Stock-Based Compensation
Martin Persson, Mitchell Stein, Spencer Higgs
In November 2014, questions were raised about American electric car manufacturer Tesla Motors Inc.'s (Tesla's) accounting practices, which did not follow the generally accepted accounting practices (GAAP). Tesla’s third quarter 2014 financial statements showed a loss of almost US$75 million when using U.S. GAAP standards, compared to a profit of over $5 million when using its own non-GAAP standards. The accounting discrepancy between the two systems was due mainly to the allotment of vehicle buybacks, stock-based compensation, and regulatory credit sales. Tesla’s share price had risen to $242 from its initial public offering of $17. Had the company’s non-GAAP adjustments influenced investors’ perception of Tesla’s performance and, therefore, the resulting stock price? Specifically, was it reasonable to state that Tesla had been profitable in the third quarter of 2014? Were Tesla’s non-GAAP adjustments appropriate? How could the adjustments between Tesla’s GAAP and non-GAAP numbers be explained? What would Tesla’s performance look like if the financial statements were adjusted for the resale value guarantee, regulatory credits, and stock-based compensation?
In Search of the 'Right' Numbers: Navigating Professional Judgment Challenges in Accounting
Mitchell Stein, Matthew Sooy, Anthony Scilipoti
In October 2001, the co-founder and vice-president of Veritas Investment Research Corporation (Veritas), was considering his next steps as he prepared to issue a highly critical report on Bombardier Inc. (Bombardier). The vice-president believed that Bombardier had relied upon accounting innovations rather than operating innovations in order to report accounting profits. While numerous issues concerned the vice-president, one of the most critical was the way the company had managed the relationships between its various operating segments. These issues had developed over recent years and threatened to increase following the business decisions in the wake of September 11, 2001, which had dramatically affected the sale of aircraft. The vice-president’s investment report would have significant consequences for numerous stakeholders and would affect both his own and Veritas’s reputations. How should Veritas interpret the various issues related to Bombardier’s accounting and reporting choices?
Revenue Recognition at Amazon.com
Chris Sturby, Darren Henderson
In 2014, an equity analyst is assigned to cover Amazon.com, a U.S. online retailer that began selling only books but that has grown into providing a vast selection of items across categories as varied as electronics, toys, beauty products and office supplies. The company prides itself on offering a unique, personalized experience for its customers not only by selling directly but also by working with third party retailers and by offering web services (such as computing, storage, database and networking solutions, among others) and new technology (such as the Kindle reading device and a smartphone). The analyst must evaluate each of the company's revenue streams to understand how each part of its business model is translated to the financial statements. After developing an understanding of the company and the industry in which it operates, she must analyze the financial statements, especially the revenue recognition note and note on segmented reporting. Using this as a starting point, she can then assess the company's performance based on key metrics and develop a list of questions to ask at the next earnings conference call.
IFRS: Canada's Decision
Vaughan S. Radcliffe, Mitchell Stein, 2011
The case comprises of an interview with Paul Cherry, who as chair of the Accounting Standards Board of Canada (the Canadian accounting standard setter) led a process that brought Canada to adopt international financial reporting standards (IFRS). The case provides a rich and in-depth examination of the real-world considerations that led Canada to adopt IFRS.
Accounting for Faulty Ignition Switches at General Motors Company
Darren Henderson, Julia Cutt, 2014
In this case the chief executive officer (CEO) of General Motors (GM) must decide whether to issue a recall based on a defect that had been found through an internal safety committee investigation. In deciding whether to issue a recall, consideration must be given to which car models to include, whether to offer any additional compensation to drivers, the potential legal and public relations repercussions, and the accounting implications of these contingencies and potential costs.
Mary Gillett, Morgan Hart
In 2014, a well-reputed innovative technology company had introduced a new operating system and two new smartphone devices with the goal of turning around the company’s slumping hardware sales. Despite positive product reviews in the media, the models did not sell as well as expected. Consequently, the lower demand led to impairment of inventory and supply commitments at various times throughout the following fiscal year. At the end of the fiscal year, the task facing the company’s chief financial officer was deciding whether or not further impairment was required. Because this decision came at a time of significant uncertainty about the company’s future in the competitive marketplace, the task also involved considering the impact of a potential adjustment on the company’s financial statements and on shareholder confidence.
Valeant Pharmaceuticals: Eroded Reputation and Stock Price
Mary Gillett, Amy Horrocks
In early January 2019, a recent Ivey Business School graduate logged into her online trading account to review her portfolio’s performance. As she scanned her investments, she paused at one stock in particular. It was time to make a decision regarding one of her most volatile stocks—Valeant Pharmaceuticals International Inc., recently renamed Bausch Health Companies Inc. The pharmaceutical company was once celebrated for its innovative business approach. However, both its stock price and reputation as one of Canada’s most valuable companies had plummeted in recent years, after accusations of price gouging and investigations for fraud by the US Securities and Exchange Commission. Overburdened with significant amounts of debt from a spree of acquisitions, the company was also scrutinized by investors and regulators for using non-GAAP accounting metrics for its financial statements. The recent graduate wondered if she should hold out hope that the stock would return to its historic highs, or if she should cut her losses and divest the stock.
Loblaw and Shoppers Drug Mart
Mary Gillett, Chris Sturby, Leanne Bowden
In mid-2013, the executive chairman of Loblaw Companies Ltd. was considering whether it was in his company’s best interest to acquire Shoppers Drug Mart. In December 2012, Loblaw had announced a proposal to create a real estate investment trust to which it would initially transfer approximately 75 per cent of its substantial real estate holdings, thus unlocking value for its shareholders. At the same time, Shoppers’ shares were trading at an historically attractive valuation. On the other hand, competition was heating up with the move of big box stores, such as Wal-Mart and Target, into Canada and the growth of online purchasing. Moreover, new government regulations aimed at decreasing the high cost of drugs had an immediate impact on pharmaceutical companies. With Loblaw’s shares trading near a six-year high, there was now the attractive opportunity to use them as currency to make an acquisition whose potential synergies were estimated to be in excess of $300 million per year. Was this a good time to act on what had been perceived for a number of years as an attractive merger option? Did it make strategic sense? If so, what price should Loblaw pay for Shoppers?
Fortune Minerals — The Nico Project
Chris Struby, Melissa Jean
A publicly traded mining company has an opportunity to develop a mine containing gold, cobalt, and bismuth in Canada’s Northwest Territories and must determine the financial viability of doing so. In order to gauge the attractiveness of the project, the company needs to evaluate the net present value of the opportunity, given volatile and uncertain variables, such as commodity prices and foreign exchange rates. The company must also consider a number of qualitative considerations that may affect the project, such as relations with First Nations communities.
Alleged Accounting Fraud at Nortel Networks Corporation
Darren Henderson, Chris Sturby, Christine Liu, 2012
This case investigates the analysis made by an investor of Nortel Networks Corporation, after the company files for bankruptcy protection in the United States and Canada. The investor tries to understand the accounting issues raised in the SEC and OSC investigations so that he learns from his losses in Nortel to make better future investment decisions.
Screen Microtech Inc.
Vaughan S. Radcliffe, Deep Dhillon
Screen Microtech Inc., a capacitive touch screen manufacturer, had seen significant growth over the past year: it had moved its manufacturing plant, expanded operations, built a larger client base and seen an unprecedented increase in sales. Its chief executive officer was preparing an initial public offering that could lead to a significant bonus and stock shares for himself and for the company’s chief financial officer. This could be enough to induce them to secure improved financial results through any means necessary. Certainly, it could bias their approach to accounting policy choices. Was the company’s accounting ethical? Did it feature earnings management or earnings manipulation? What was the difference between the two, if any? What was the effect of such accounting practices on the financial markets?
Highland Malt: Accounting Policy Choices in Financial Statements
Mitchell Stein, Vaughan S. Radcliffe, Erik Stein
In early 2020, a recent graduate from a prestigious masters of business administration program was working as a financial accountant for a renowned private equity firm in Glasgow, Scotland. For her father’s retirement, she was considering a gift from Highland Malt Inc.. The company’s Scotch whisky was offered in a limited quantity and promoted as an investment opportunity. Unlike ordinary bottled whiskies, Highland Malt Inc. sold this new line solely by the barrel. Collectors had to pay the full amount of CA$10,000 upfront, but could request a full refund within 180 days if unsatisfied with the product. The refund period allowed the collector to visit the distillery and inspect the purchase to ensure it met all expectations. The accountant was wondering if she should proceed with her plan to buy a barrel of Highland whisky as an investment and collector’s item for her father.
The Ontario Fair Hydro Plan: Rate-Regulated Accounting and Public Policy
Vaughan S. Radcliffe, George Crouch
This case explores Ontario's Fair Hydro Plan, a 2017 policy of the Government of Ontario that aimed to reduce consumer electricity rates by borrowing to provide subsidies. This borrowing was to be repaid through increased rates levied on future consumers in the province. This policy was accounted for using the principles of rate-regulated accounting. The impetus for these changes was the rapidly rising electricity rates.
Penn West Petroleum Ltd.
Martin Persson, Vaughan S. Radcliffe, Mitchell Stein, Hammad Siddiqui
In 2015, Penn West Petroleum Ltd. (Penn West), a large Canadian oil company, made multiple acquisitions that led to a buildup of goodwill (i.e., the purchase price was higher than the net book value of the acquisitions). When the economic environment worsened, there was concern that this goodwill had been impaired. The concern deepened as economic factors improved but Penn West’s stock performance continued to be poor, indicating that the market believed that the company was potentially overvalued. A review of Penn West’s accounting practices revealed irregularities, and industry analysts — as well as the U.S. Securities and Exchange Commission — began to question the value of the company’s goodwill. It was becoming clear that Penn West had been overly optimistic in its forecasts regarding revenue streams from its properties. Would the company be able to move forward? How?